S-3ASR

As filed with the Securities and Exchange Commission on August 4, 2006

Registration No. 333-          

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-3

REGISTRATION STATEMENT

Under

THE SECURITIES ACT OF 1933

HEALTH CARE PROPERTY INVESTORS, INC.

(Exact name of registrant as specified in its charter)

Maryland	3760 Kilroy Airport Way, Suite 300	33-0091377
(State or Other Jurisdiction of	Long Beach, California  90806	(I.R.S. Employer
Incorporation or Organization)	(562) 733-5100	Identification No.)

(Address, Including Zip Code, and Telephone Number, Including

Area Code, of Registrant’s Principal Executive Offices)

Edward J. Henning, Esq.

Senior Vice President, General Counsel and Corporate Secretary

3760 Kilroy Airport Way, Suite 300

Long Beach, California  90806

(562) 733-5100

(Name, Address, Including Zip Code, and Telephone Number, Including

Area Code, of Agent For Service)

Copy to:

R. Scott Shean, Esq.

Latham & Watkins LLP

650 Town Center Drive, Suite 2000

Costa Mesa, California 92626

(714) 540-1235

Approximate date of commencement of proposed sale to the public:  From time to time after this registration statement becomes effective.

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.  ¨

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.  x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.  x

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ¨

CALCULATION OF REGISTRATION FEE

Title of securities to be registered	Amount to be registered (1)	Proposed maximum offering price per share(2)		Proposed maximum aggregate offering price(2)		Amount of registration fee(2)
Common Stock, par value $1.00 per share	699,454	$	26.89	$	18,808,318	$	2,013

(1)In the event of a stock split, stock dividend, or similar transaction involving the Company’s common stock, the number of shares registered shall automatically be increased to cover the additional shares in accordance with Rule 416 under the Securities Act.

(2)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of the Securities Act, based upon the average of the high and low prices of the shares of common stock reported on the New York Stock Exchange on August 1, 2006.

This registration statement relates to the possible issuance of 699,454 shares of common stock of Health Care Property Investors, Inc. to certain holders of units representing non-managing member interests in HCP DR California, LLC.

PROSPECTUS

Health Care Property Investors, Inc.

699,454  Shares

Common Stock

This prospectus relates to the possible issuance of up to 699,454 shares of common stock of Health Care Property Investors, Inc., a Maryland corporation, from time to time, to certain holders of non-managing member units in HCP DR California, LLC upon tender of those units for redemption.

We will not receive any proceeds from the issuance of the shares of our common stock pursuant to this prospectus to the holders of units tendered for redemption, but we will acquire non-managing member units of HCP DR California, LLC from the redeeming non-managing members in exchange for shares of our common stock that we may issue pursuant to this prospectus.

HCP DR California, LLC has agreed to pay certain expenses incident to the registration of the 699,454 shares of common stock offered herein, including registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing and distribution expenses, internal expenses, fees and expenses of our counsel, accountants and other advisors.

Our shares of common stock are traded on the New York Stock Exchange under the symbol “HCP.” On August 2, 2006, the last reported sales price of our common stock on the New York Stock Exchange was $27.11 per share.

You should consider the risks discussed in “Risk Factors” beginning on page 1 of this prospectus before you invest in our common stock.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is August 4, 2006

Health Care Property Investors, Inc.
3760 Kilroy Airport Way, Suite 300
Long Beach, California 90806
(562) 733-5100

TABLE OF CONTENTS

All references in this prospectus to “HCP,” “we,” “us” or “our” mean Health Care Property Investors, Inc., its majority-owned subsidiaries and other entities controlled by Health Care Property Investors, Inc. except where it is clear from the context that the term means only the issuer, Health Care Property Investors, Inc. All references to “common stock” refer to our common stock, par value $1.00 per share. All references to “units” refer to the units in HCP DR California, LLC.

You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone else to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. An offer to sell these securities will not be made in any jurisdiction where the offer and sale is not permitted. You should assume that the information appearing in this prospectus, as well as information we previously filed with the Securities and Exchange Commission and incorporated by reference, is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date.

ABOUT THIS PROSPECTUS

This prospectus is part of an automatic shelf registration statement on Form S-3 that we filed with the Securities and Exchange Commission (the “SEC”) as a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act of 1933, as amended. As allowed by the SEC rules, this prospectus does not contain all of the information included in the registration statement. For further information, we refer you to the registration statement, including its exhibits. Statements contained in this prospectus about the provisions or contents of any agreement or other document are not necessarily complete. If the SEC’s rules and regulations require that an agreement or document be filed as an exhibit to the registration statement, please see that agreement or document for a complete description of these matters.

You should read this prospectus and any prospectus supplement together with any additional information you may need to make your investment decision. You should also read and carefully consider the information in the documents we have referred you to in “Where to Find Additional Information” below. Information incorporated by reference after the date of this prospectus may add, update or change information contained in this prospectus. Any information in such subsequent filings that is inconsistent with this prospectus will supersede the information in this prospectus or any earlier prospectus supplement.

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RISK FACTORS

Below are the risks that we believe are material to investors who purchase or own our common stock. In addition to other information contained or incorporated by reference in this prospectus, you should carefully consider the following factors before making a decision to redeem units or acquiring the common stock offered by this prospectus.

Risks Related to the Exchange of Non-Managing Member Units for Common Stock

The exchange of non-managing member units for our common stock is a taxable transaction.

The exchange of non-managing member units for shares of our common stock (which may occur following the tender of such non-managing member units for redemption if we elect to satisfy the redemption obligation in shares of our common stock) will be treated for tax purposes as a sale of the non-managing member units by the holders of such units. A holder of such units will recognize gain or loss for income tax purposes in an amount equal to the fair market value of the shares of our common stock received in the exchange, plus the amount of the HCP DR California, LLC liabilities allocable to the units being exchange, less the holder’s adjusted tax basis in the units exchanged. The recognition of any loss resulting from the exchange of non-managing member units for shares of our common stock is subject to a number of limitations set forth in the Internal Revenue Code of 1986, as amended, referred to here as the Internal Revenue Code. It is possible that the amount of gain recognized or even the tax liability resulting from the gain could exceed the value of the shares of our common stock received upon the exchange. In addition, the ability of a holder of non-managing member units to sell a substantial number of shares of our common stock in order to raise cash to pay tax liabilities associated with the exchange of non-managing member units may be restricted and, as a result of stock price fluctuations, the price the holder receives for the shares of our common stock may not equal the value of the non-managing member units at the time of the exchange.

An investment in our common stock is different from an investment in non-managing member units in HCP DR California, LLC.

If a non-managing member exercises its right to require the redemption of its units, the non-managing member may receive cash or, at our election, shares of common stock in exchange for the non-managing member units.  If a non-managing member tenders all its member units and receives cash, the non-managing member will no longer have any interest in HCP DR California, LLC or us, will not benefit from any subsequent increases in the share price of our common stock and will not receive any future distributions from HCP DR California, LLC or us (unless the non-managing member currently owns or acquires in the future additional shares of our common stock or additional units).  If a non-managing member receives shares of our common stock, he or she will become one of our stockholders rather than a non-managing member in HCP DR California, LLC. Although the nature of an investment in shares of our common stock is substantially equivalent economically to an investment in units in HCP DR California, LLC, there are differences between ownership of non-managing member units and ownership of our common stock. These differences, some of which may be material to you, include:

·form of organization;

·management control;

·voting and consent rights;

·liquidity; and

·federal income tax considerations.

These differences are further discussed in “Comparison of HCP DR California, LLC and HCP.”

Risks Related to Our Operators

If our facility operators are unable to operate our properties in a manner sufficient to generate income, they may be unable to make rent and loan payments to us.

The healthcare industry is highly competitive and we expect that it may become more competitive in the future. Our operators are subject to competition from other healthcare providers that provide similar services. Such competition, which has intensified due to overbuilding in some segments in which we operate, has caused the fill-up rate of newly constructed buildings to slow and the monthly rate that many newly built and previously existing facilities were able to obtain for their services to decrease. The profitability of healthcare facilities depends upon several factors, including the number of physicians using the healthcare facilities or referring patients there, competitive systems of healthcare delivery and the size and composition of the population in the surrounding area. Private, federal and state payment programs and the effect of other laws and regulations may also have a significant influence on the revenues and income of the properties. If our operators are not competitive with other healthcare providers and are unable to

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generate income, they may be unable to make rent and loan payments to us, which could adversely affect our cash flow and financial performance and condition.

The bankruptcy, insolvency or financial deterioration of our facility operators could significantly delay our ability to collect unpaid rents or require us to find new operators.

Our financial position and our ability to make distributions to our stockholders may be adversely affected by financial difficulties experienced by any of our major operators, including bankruptcy, insolvency or a general downturn in the business, or in the event any of our major operators do not renew or extend their relationship with us as their lease terms expire.

We are exposed to the risk that our operators may not be able to meet their obligations, which may result in their bankruptcy or insolvency. Although our leases and loans provide us the right to terminate an investment, evict an operator, demand immediate repayment and other remedies, the bankruptcy laws afford certain rights to a party that has filed for bankruptcy or reorganization. An operator in bankruptcy may be able to restrict our ability to collect unpaid rents or interest during the bankruptcy proceeding.

Tenet Healthcare Corporation accounts for a significant percentage of our revenues and is currently experiencing significant legal, financial and regulatory difficulties.

During 2005, Tenet Healthcare Corporation accounted for approximately 11% of our revenues. According to public disclosures, Tenet is experiencing significant legal, financial and regulatory difficulties. We cannot predict with certainty the impact, if any, of the outcome of these uncertainties on our consolidated financial statements. The failure or inability of Tenet to pay its obligations could materially reduce our revenue, net income and cash flows, which could adversely affect the value of our common stock and could cause us to incur impairment charges or a loss on the sale of the properties.

Our operators are faced with increased litigation and rising insurance costs that may affect their ability to make their lease or mortgage payments.

In some states, advocacy groups have been created to monitor the quality of care at healthcare facilities, and these groups have brought litigation against operators. Also, in several instances, private litigation by patients has succeeded in winning very large damage awards for alleged abuses. The effect of this litigation and potential litigation has been to materially increase the costs of monitoring and reporting quality of care compliance incurred by our operators. In addition, the cost of liability and medical malpractice insurance has increased and may continue to increase so long as the present litigation environment affecting the operations of healthcare facilities continues. Continued cost increases could cause our operators to be unable to make their lease or mortgage payments, potentially decreasing our revenue and increasing our collection and litigation costs. Moreover, to the extent we are required to take back the affected facilities, our revenue from those facilities could be reduced or eliminated for an extended period of time.

Decline in the skilled nursing sector and changes to Medicare and Medicaid reimbursement rates may have significant adverse consequences for us.

Certain of our skilled nursing operators and facilities continue to experience operating problems in part due to a national nursing shortage, increased liability insurance costs, and low levels of Medicare and Medicaid reimbursement. Due to economic challenges facing many states, nursing homes will likely continue to be under-funded. These challenges have had, and may continue to have, an adverse effect on our long-term care facilities and facility operators.

Risks Related to Real Estate Investment and Our Structure

We rely on external sources of capital to fund future capital needs, and if our access to such capital is difficult or on commercially unreasonable terms, we may not be able to meet maturing commitments or make future investments necessary to grow our business.

In order to qualify as a real estate investment trust (“REIT”) under the Internal Revenue Code, we are required, among other things, to distribute to our stockholders each year at least 90% of our REIT taxable income (excluding capital gains), and will be subject to tax to the extent we distribute to our stockholders, each year, less than 100% of our REIT taxable income (including capital gains). Because of this distribution requirement, we may not be able to fund all future capital needs, including capital needs in connection with acquisitions, from cash retained from operations. As a result, we rely on external sources of capital. If we are unable to obtain needed capital at all or only on unfavorable terms from these sources, we might not be able to make the investments needed to grow our business, or to meet our obligations and commitments as they mature, which could negatively affect the ratings of our debt and even, in extreme circumstances, affect our ability to continue operations. Our access to capital depends upon a number of factors over which we have little or no control, including:

·general market conditions;

·the market’s perception of our growth potential;

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·our current and potential future earnings and cash distributions; and

·the market price of the shares of our capital stock.

If we are unable to identify and purchase suitable healthcare facilities at a favorable cost, we will be unable to continue to grow through acquisitions.

Our ability to grow through acquisitions is integral to our business strategy and requires us to identify suitable acquisition candidates that meet our criteria and are compatible with our growth strategy. The acquisition and financing of healthcare facilities at favorable costs is highly competitive. We may not be successful in identifying suitable property or other assets that meet our acquisition criteria or in consummating acquisitions on satisfactory terms or at all. If we cannot identify and purchase a sufficient quantity of healthcare facilities at favorable prices, or if we are unable to finance such acquisitions on commercially favorable terms, our business will suffer.

Unforeseen costs associated with the acquisition of new properties could reduce our profitability.

Our business strategy contemplates future acquisitions. The acquisitions we make may not prove to be successful. We might encounter unanticipated difficulties and expenditures relating to any acquired properties, including contingent liabilities. Further, newly acquired properties might require significant management attention that would otherwise be devoted to our ongoing business. We might never realize the anticipated benefits of an acquisition, which could adversely affect our profitability.

Since real estate investments are illiquid, we may not be able to sell properties when we desire.

Real estate investments generally cannot be sold quickly. We may not be able to vary our portfolio promptly in response to changes in the real estate market. This inability to respond to changes in the performance of our investments could adversely affect our ability to service our debt. The real estate market is affected by many factors that are beyond our control, including:

·adverse changes in national and local economic and market conditions;

·changes in interest rates and in the availability, costs and terms of financing;

·changes in governmental laws and regulations, fiscal policies and zoning and other ordinances and costs of compliance with laws and regulations;

·the ongoing need for capital improvements, particularly in older structures;

·changes in operating expenses; and

·civil unrest, acts of war and natural disasters, including earthquakes and floods, which may result in uninsured and underinsured losses.

We cannot predict whether we will be able to sell any property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. In addition, there are provisions under the federal income tax laws applicable to REITs that may limit our ability to recognize the economic benefit from a sale of our assets. These factors and any others that would impede our ability to respond to adverse changes in the performance of our properties could have a material adverse effect on our operating results and financial condition.

Transfers of healthcare facilities generally require regulatory approvals, and alternative uses of healthcare facilities are limited.

Because transfers of healthcare facilities may be subject to regulatory approvals not required for transfers of other types of commercial operations and other types of real estate, there may be delays in transferring operations of our facilities to successor tenant operators or we may be prohibited from transferring operations to a successor tenant operator. In addition, substantially all of our properties are healthcare facilities that may not be easily adapted to non-healthcare related uses. If we are unable to transfer properties at times opportune to us, our revenue and operations may suffer.

We may experience uninsured or underinsured losses.

We generally require our operators to secure and maintain comprehensive liability and property insurance that covers us, as well as the operators, on most of our properties. Some types of losses, however, either may be uninsurable or too expensive to insure against. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. We cannot assure you that material losses in excess of insurance proceeds will not occur in the future.

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Increases in interest rates may increase our interest expense and adversely affect our cash flow and our ability to service our indebtedness.

At March 31, 2006, our total consolidated indebtedness was approximately $2.1 billion, of which approximately $386 million, or 19%, is subject to variable interest rates. This variable rate debt had a weighted average interest rate of approximately 5.4% per annum. Increases in interest rates on this variable rate debt would increase our interest expense, which could harm our cash flow and our ability to service our indebtedness.

Loss of our tax status as a REIT would have significant adverse consequences to us.

We currently operate and have operated commencing with our taxable year ended December 31, 1985 in a manner that is intended to allow us to qualify as a REIT for federal income tax purposes under the Internal Revenue Code.

Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying sources, and we must satisfy a number of requirements regarding the composition of our assets. Also, we must make distributions to stockholders aggregating annually at least 90% of our REIT taxable income, excluding capital gains. In addition, new legislation, regulations, administrative interpretations or court decisions may adversely affect our investors or our ability to qualify as a REIT for tax purposes. Although we believe that we have been organized and have operated in such manner, we can give no assurance that we have qualified or will continue to qualify as a REIT for tax purposes.

If we lose our REIT status, we will face serious tax consequences that will substantially reduce the funds available to make payments of principal and interest on the debt securities we issue and to make distributions to our stockholders. If we fail to qualify as a REIT:

·we would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to federal income tax at regular corporate rates;

·we also could be subject to the federal alternative minimum tax and possibly increased state and local taxes; and

·unless we are entitled to relief under statutory provisions, we could not elect to be subject to tax as a REIT for four taxable years following the year during which we were disqualified.

In addition, if we fail to qualify as a REIT, all distributions to stockholders would be subject to tax as regular corporate dividends to the extent of our current and accumulated earnings and profits and we would not be required to make distributions to stockholders.

As a result of all these factors, our failure to qualify as a REIT also could impair our ability to expand our business and raise capital, and could adversely affect the value of our common stock.

To maintain our REIT status, we may be forced to borrow funds on a short-term basis during unfavorable market conditions.

To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our net taxable income each year, excluding capital gains, and we will be subject to regular corporate income taxes to the extent that we distribute less than 100% of our net taxable income each year. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. In order to maintain our REIT status and avoid the payment of income and excise taxes, we may need to borrow funds on a short-term basis to meet the REIT distribution requirements even if the then prevailing market conditions are not favorable for these borrowings. These short-term borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments.

Our charter contains ownership limits with respect to our common stock.

Our charter, subject to certain exceptions, contains restrictions on the ownership and transfer of our common stock that are intended to assist us in preserving our qualification as a REIT.  Under our charter, subject to certain exceptions, no person or entity may own, actually or constructively, more than 9.8% (by value or by number of shares, whichever is more restrictive) of the outstanding shares of our common stock.

Additionally, our charter has a 9.9% ownership limitation on the company’s voting shares. Our board of directors, in its sole discretion, may exempt a proposed transferee from either ownership limit. The ownership limits may delay, defer or prevent a transaction or a change of control that might be in the best interest of our stockholders.

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Risks Relating to the Acquisition of CNL Retirement Properties, Inc.

The value of our common stock to be issued to CRP shareholders in the merger will fluctuate.

In the pending merger of CNL Retirement Properties, Inc., or CRP, a Maryland corporation, with and into Ocean Acquisition 1, Inc., a Maryland corporation and our wholly-owned subsidiary, CRP shareholders will receive 0.0865 of a share of our common stock and $11.1293 in cash, without interest and less any required tax withholding, for each share of CRP common stock they own. As a result of CRP shareholders receiving a portion of the merger consideration in shares of our stock, the value of the merger consideration to be received by CRP shareholders will depend on the market price of our stock at the time the merger is completed. The market price of our stock at t he closing of the merger will likely vary from time to time. These variations may be caused by a number of factors, including changes in the businesses, operations or prospects of HCP or CRP, the timing of the merger and general market and economic conditions. Additionally, the payment of shares of our common stock to CRP shareholders in connection with the merger would dilute the share ownership of our existing common stockholders and may affect the value of our common stock. The merger consideration will not be adjusted for any increase or decrease in the market price of our common stock or CRP common stock.

If we are unable to successfully integrate the operations of CRP, our business and earnings may be negatively affected.

The merger with CRP will involve the integration of companies that have previously operated independently. Successful integration of the operations of CRP will depend primarily on our ability to consolidate operations, systems procedures, properties and personnel and to eliminate redundancies and costs. The merger will also pose other risks commonly associated with similar transactions, including unanticipated liabilities, unexpected costs and the diversion of management’s attention to the integration of the operations of our operations and those of CRP. We cannot assure you that we will be able to integrate CRP’s operations without encountering difficulties, including, but not limited to, the loss of key employees, the disruption of our respective ongoing businesses or possible inconsistencies in standards, controls, procedures and policies. Estimated cost savings are projected to come from various areas that our management has identified through the due diligence and integration planning process. If we have difficulties with any of these integrations, we might not achieve the economic benefits we expect to result from the merger, and this may hurt our business and earnings. In addition, we may experience greater than expected costs or difficulties relating to the integration of the business of CRP and/or may not realize expected cost savings from the merger within the expected time frame, if at all.

Difficulties associated with establishing joint ventures and contributing properties to those joint ventures or selling properties, including CRP’s properties, could limit the combined company’s flexibility and adversely affect the anticipated benefits of the merger and the market price of our common stock.

We have established joint ventures with respect to certain of our properties or sold certain of our properties to third parties in recent years and intend to continue to establish joint ventures and sell properties as opportunities arise. We believe that many of CRP’s current and future developments will be good candidates to contribute to joint ventures or sell to third parties. The combined company’s ability to establish joint ventures or sell properties, including properties currently owned or developed by CRP, on advantageous terms is dependent upon several factors, some of which are beyond the control of our management. These factors include our ability to identify financial partners willing to contribute to joint ventures on acceptable terms, if at all, and our ability to obtain debt financing for such joint ventures on attractive terms, if at all, as well as competition from other owners of properties and rights of third parties with respect to such properties. Continued interest from and capital provided by other joint venture investors is necessary in order for us to continue its strategy of contributing properties to such joint ventures. Our inability to establish joint ventures and contribute properties to such joint ventures or to sell properties, including those properties currently owned by CRP, or to do so on advantageous terms could materially adversely affect our business.

We and CRP are expected to incur substantial costs in connection with the merger, which could result in our not realizing some of the anticipated benefits of the merger.

We and CRP are expected to incur one-time, pre-tax costs of approximately $33.1 million in connection with the merger. These costs will include investment banking expenses, legal and accounting fees, printing expenses and other related charges incurred by us and CRP. Completion of the merger will also require the payment of fees in connection with certain of CRP’s existing debt. In addition, we anticipate prepaying and/or refinancing other of CRP’s existing debt. We also expect to incur one-time, pre-tax cash and non-cash costs related to the integration of us and CRP, which cannot be estimated at this time. There can be no assurance that the costs incurred by us and CRP in connection with the merger will not be higher than expected or that we will not incur additional unanticipated costs and expenses in connection with the merger.

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The combined company’s indebtedness following the completion of the merger will be higher than our existing indebtedness. This increased level of indebtedness could adversely affect us in many ways, including by reducing funds available for other business purposes, reducing our flexibility and increasing our exposure to variations in interest rates.

Our indebtedness as of March 31, 2006 was approximately $3.4 billion. Our pro forma indebtedness as of March 31, 2006, giving effect to the merger and taking into account our anticipated debt financings in connection with the merger, would be approximately $7 billion. Our anticipated debt financings include up to $2.6 billion of aggregate borrowings under a 364 day bridge facility and a two-year term loan facility. In addition, it is expected that we will continue to incur debt in the future. As a result of the increase in debt, demands on our cash resources will increase after the merger. The increased levels of debt could reduce funds available to us to pay dividends, or make capital expenditures and acquisitions or create competitive disadvantages for us compared to other companies with lower debt levels. In addition to requiring repayment or refinancing within a period of time ranging from 364 days to three years, the debt facilities that we expect to enter into to finance the merger will be required to be repaid from the cash proceeds of non-ordinary course asset sales, the incurrence of certain debt, the issuance of additional equity and certain other events. As a result of such covenants and our expected level of debt generally, our flexibility could be significantly limited, including our ability to finance or refinance our properties, contribute properties to joint ventures or sell properties as needed.

At March 31, 2006, approximately $412 million of our debt was subject to variable interest rates. We anticipate that a substantial portion of the new debt to be incurred or assumed in connection with the merger will also be subject to variable interest rates and that, following the merger, a higher percentage of our debt overall will be subject to variable interest rates. If interest rates increase, the combined company’s interest costs will also increase, which could harm our cash flow and our ability to service debt. An increase in market interest rates may also lead investors to demand a higher annual distribution rate, which could adversely affect the market price of our common stock.

Our business and stock price may be adversely affected if the merger with CRP is not completed.

The merger with CRP is subject to several customary conditions, including obtaining clearance from governmental entities. If our merger with CRP is not completed, we could be subject to a number of risks that may adversely affect our business and stock price, including:

·our management’s attention may be diverted f rom our day-to-day business and our employees and our relationships with customers and joint venture partners may be disrupted as a result of efforts relating to the acquisition;

·the market price of shares of our stock may decline to the extent that the current market price reflects a market assumption that the merger will be completed;

·                  we must pay certain costs related to the merger, such as legal and accounting fees and printing expenses; and

·we would not realize the benefits we expect by acquiring CRP.

As a result of the merger, the number of our stockholders will increase by approximately 92,442 persons. Sales by such individuals could exert downward pressure on the price of our common stock.

As of  August 1, 2006, CRP had 92,442 holders of its common stock. CRP common stock is not publicly traded and, accordingly, is relatively illiquid. As a result of the merger, CRP’s stockholders will receive shares of our common stock, which is publicly traded and more liquid. Sales by former CRP stockholders of our common stock could exert downward pressure on the price of our common stock.

As a result of the merger and the Advisor merger, we may inherit tax liabilities and attributes from CRP and the Advisor.

Concurrently with the CRP merger, CNL Retirement Corp., or the Advisor, which is the external advisor to CRP, will merge with and into Ocean Acquisition 2, LLC, or Ocean 2, a wholly owned subsidiary of ours, pursuant to the Agreement and Plan of Merger, dated as of May 1, 2006, by and among us, the Advisor, the stockholders of the Advisor and Ocean 2. We refer to this merger as the Advisor merger.  As a result of the merger and the Advisor merger, we may succeed to certain tax liabilities and tax attributes of CRP and the Advisor.  See “United States Federal Income Tax Considerations—Tax Liabilities and Attributes Inherited from CRP” and “United States Federal Income Tax Considerations—Tax Liabilities and Attributes Inherited from the Advisor.”

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WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any materials we file with the SEC at its public reference room at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of this information by mail from the public reference room of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. Our SEC filings are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at http://www.sec.gov. You may inspect information that we file with The New York Stock Exchange, as well as our SEC filings, at the offices of The New York Stock Exchange at 20 Broad Street, New York, New York 10005.

The SEC allows us to “incorporate by reference” certain information we file with the SEC, which means that we can disclose important information to you by referring to the other information we have filed with the SEC.  The information that we incorporate by reference is considered a part of this prospectus and information that we file later with the SEC will automatically update and supersede the information contained in this prospectus.  We incorporate by reference the following documents we filed with the SEC pursuant to Section 13 of the Securities Exchange Act of 1934, as amended:

·our Current Reports on Form 8-K filed on February 9, 2006, February 17, 2006, February 21, 2006, May 2, 2006 (pursuant to Items 8.01 and 9.01), May 4, 2006, May 17, 2006, June 30, 2006, August 2, 2006 and August 4, 2006;

·our Quarterly Report on Form 10-Q for the quarter ended March 31, 2006;

·our Annual Report on Form 10-K for the fiscal year ended December 31, 2005;

·our Proxy Statement filed on April 10, 2006; and

·the description of our common stock contained in our registration statement on Form 10 dated May 7, 1985 (File No. 1-8895), including the amendments dated May 20, 1985 and May 23, 1985, and any other amendment or report filed for the purpose of updating such description, including the description of amendments to our charter contained in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2001 and June 30, 2004.

We are also incorporating by reference additional documents that we may file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this prospectus and prior to the termination of the offering of the securities described in this prospectus.  These documents include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as Proxy Statements.  Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement.  Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.

Documents incorporated by reference are available from us without charge, excluding all exhibits unless we have specifically incorporated by reference the exhibit in this prospectus.  You may obtain documents incorporated by reference in this prospectus by requesting them in writing or by telephone from:

Investor Relations
Health Care Property Investors, Inc.
3760 Kilroy Airport Way, Suite 300
Long Beach, California  90806
(562) 733-5100
investorrelations@hcpi.com

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CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS

Statements in this prospectus and the information incorporated by reference in this prospectus or any prospectus supplement that are not historical factual statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this section for purposes of complying with these safe harbor provisions.  The statements include, among other things, statements regarding the intent, belief or expectations of us and our officers and can be identified by the use of terminology such as “may,” “will,” “expect,” “believe,” “intend,” “plan,” “estimate,” “should” and other comparable terms or the negative thereof.  In addition, we, through our senior management, from time to time make forward-looking oral and written public statements concerning our expected future operations and other developments.  You are cautioned that, while forward-looking statements reflect our good faith belief and best judgment based upon current information, they are not guarantees of future performance and are subject to known and unknown risks and uncertainties.  Actual results may differ materially from the expectations contained in the forward-looking statements as a result of various factors.  In addition to the factors set forth in this prospectus and in our annual report on Form 10-K for the fiscal year ended December 31, 2005, you should consider the following:

(a)Legislative, regulatory, or other changes in the healthcare industry at the local, state or federal level which increase the costs of or otherwise affect the operations of, our tenants and borrowers;

(b)Changes in the reimbursement available to our operators by governmental or private payors, including changes in Medicare and Medicaid payment levels and the availability and cost of third party insurance coverage;

(c)Competition for tenants and borrowers, including with respect to new leases and mortgages and the renewal or rollover of existing leases;

(d)Availability of suitable healthcare facilities to acquire at favorable prices and the competition for such acquisition and financing of healthcare facilities;

(e)The ability of our tenants and borrowers to operate our properties in a manner sufficient to maintain or increase revenues and to generate sufficient income to make rent and loan payments;

(f)The financial weakness of some operators, including potential bankruptcies, which results in uncertainties regarding our ability to continue to realize the full benefit of such operators’ leases;

(g)Changes in national or regional economic conditions, including changes in interest rates and the availability and cost of capital;

(h)The risk that we will not be able to sell or lease facilities that are currently vacant;

(i)The potential costs of SB 1953 compliance with respect to our hospital in Tarzana, California;

(j)The financial, legal and regulatory difficulties of two significant operators, Tenet and HealthSouth; and

(k)The potential impact of existing and future litigation matters.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  In light of these risks and uncertainties, the forward-looking events discussed in this prospectus or incorporated by reference in this prospectus may not occur.

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THE COMPANY

We invest primarily in real estate serving the healthcare industry in the United States. We are a Maryland corporation and were organized to qualify as a REIT in 1985. We are headquartered in Long Beach, California, with operations in Nashville, Tennessee, and our portfolio includes, as of March 31, 2006, interests in 534 properties in 42 states and consists of 138 senior housing facilities, 185 medical office buildings, 29 hospitals, 156 skilled nursing facilities and 26 other healthcare facilities. We acquire healthcare facilities and lease them to healthcare providers and provide mortgage financing secured by healthcare facilities. Our portfolio includes: (i) senior housing, including independent living facilities (“ILFs”), assisted living facilities (“ALFs”), and continuing care retirement communities (“CCRCs”); (ii) medical office buildings (“MOBs”); (iii) hospitals; (iv) skilled nursing facilities (“SNFs”); and (v) other healthcare facilities, including laboratory and office buildings.

Our executive offices are located at 3760 Kilroy Airport Way, Suite 300, Long Beach, California 90806, and our telephone number is (562) 733-5100. For additional information on us, see “Where You Can Find More Information” on page 7.

THE OFFERING

On July 22, 2005, we formed HCP DR California, LLC and acquired the sole managing member interest in HCP DR California, LLC. On July 22, 2005 we caused HCP DR California, LLC to issue 1,845,439 managing member units to us in exchange for a capital contribution of approximately $50.4 million. Also in connection with our contribution, certain limited partnerships and limited liability company subsidiaries of Aegis Assisted Living, LLC and Oakmont Senior Living, LLC, each a California limited liability company that was then unaffiliated with us or HCP DR California, LLC, made a capital contribution to HCP DR California, LLC of real property and improvements with an equity value net of assumed debt of approximately $24.5 million in exchange for an aggregate of 898,410 non-managing member units in HCP DR California, LLC. Immediately after the initial disbursement of non-managing member units to the members of Aegis Assisted Living, LLC and Oakmont Senior Living, LLC, various non-managing members redeemed their units for cash, leaving non-managing members (exclusive of HCP) with a total of 699,454 non-managing member units, and HCP with a total of 198,956 non-managing member units.

Beginning on July 22, 2006, the 699,454 non-managing member units held by the non-managing members (exclusive of HCP) may be redeemed by the holders thereof for cash, or, at our option, exchanged for common stock, as more fully described below under “Operating Agreement—Redemption Rights.” At the time of the non-managing members’ acquisition of the non-managing member units, we agreed to provide registration rights with respect to the shares of common stock for which the non-managing member units may be exchanged.

We are filing the registration statement of which this prospectus is a part pursuant to our contractual obligation related to the registration rights given to the holders of non-managing member units in HCP DR California, LLC. However, the registration of the shares of common stock being offered pursuant to this prospectus does not necessarily mean that any of the units will be tendered for redemption or that we will in fact issue any of the common stock in exchange for the units, or that if issued, such holders will offer or sell any of their shares.

USE OF PROCEEDS

We will not receive any proceeds from the issuance of shares of common stock pursuant to this prospectus; however, we will acquire non-managing member units of HCP DR California, LLC in exchange for shares of our common stock issued to a redeeming non-managing member. HCP DR California, LLC will pay certain registration expenses which we estimate to be approximately $80,000. Upon filing the registration statement, Aegis Assisted Living, LLC shall pay or cause to be paid, as contribution for the registration expenses, an aggregate of $75,000 to HCP DR California, LLC.

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DESCRIPTION OF HCP CAPITAL STOCK

Our authorized capital stock consists of 750,000,000 shares of common stock, par value $1.00 per share, and 50,000,000 shares of preferred stock, par value $1.00 per share. The following description does not contain all the information that might be important to you. Therefore you should read carefully the more detailed provisions of our articles of restatement and our third amended and restated bylaws. See “Where You Can Find More Information” beginning on page 7.

COMMON STOCK

As of August 1, 2006, there were 137,301,582 shares of common stock outstanding. All shares of common stock participate equally in dividends payable to holders of common stock, when and as authorized by our board and declared by us, and in net assets available for distribution to holders of common stock on liquidation, dissolution, or winding up. Each outstanding share of common stock entitles the holder to one vote on all matters submitted to a vote of our stockholders. Holders of common stock do not have cumulative voting rights in the election of directors.

All issued and outstanding shares of common stock are, and the common stock offered by this prospectus will be upon issuance, validly issued, fully paid and nonassessable. Holders of common stock do not have preference, conversion, exchange or preemptive rights. The common stock is listed on The New York Stock Exchange (NYSE Symbol: HCP).

The Transfer Agent and Registrar for our common stock is The Bank of New York.

PREFERRED STOCK

Under our charter, our board is authorized without further stockholder action to establish and issue, from time to time, up to 50,000,000 shares of our preferred stock, in one or more series, with such designations, preferences, powers and relative participating, optional or other special rights, and the qualifications, limitations or restrictions thereon, including, but not limited to, dividend rights, dividend rate or rates, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, and the liquidation preferences as shall be stated in the resolution providing for the issue of a series of such stock, adopted, at any time or from time to time, by our board. As of December 31, 2005, we had outstanding 4,000,000 shares of 7.25% Series E Cumulative Redeemable Preferred Stock (“Series E Preferred Stock”) with a liquidation preference of $100,000,000 and 7,820,000 shares of 7.10% Series F Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”) with a liquidation preference of $195,500,000. Certain terms of the Series E Preferred Stock and Series F Preferred Stock are described below.

Series E Preferred Stock

Voting Rights

Holders of Series E Preferred Stock generally do not have any voting rights, except in limited circumstances.

If dividends on any shares of Series E Preferred Stock are in arrears for six or more quarterly periods, whether or not consecutive, the holders of Series E Preferred Stock (voting separately as a class with all other classes or series of preferred stock upon which like voting rights have been conferred and are exercisable) are entitled to vote for the election of a total of two additional directors of HCP at a special meeting called by the holders of record of at least 25% of the Series E Preferred Stock or the holders of any other class or series of preferred stock so in arrears or at the next annual meeting of stockholders. These voting rights continue at each subsequent annual meeting until all dividends accumulated on such shares of Series E Preferred Stock for the past dividend periods and the dividend for the then current dividend period shall have been fully paid or declared and set aside for payment. In such case, our entire board is increased by two directors.

So long as any shares of Series E Preferred Stock remain outstanding, we shall not, without the consent or the affirmative vote of the holders of at least two-thirds of the shares of Series E Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting, with the Series E Preferred Stock voting separately as a class:

·authorize, create or issue, or increase the authorized or issued amount of, any class or series of stock ranking prior to the Series E Preferred Stock with respect to the payment of dividends, or the distribution of assets on liquidation, dissolution or winding up;

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·reclassify any of our authorized stock into any such shares, or authorize, create or issue any obligation or security convertible into or evidencing the right to purchase any class or series of stock ranking prior to the Series E Preferred Stock with respect to the payment of dividends, or the distribution of assets on liquidation, dissolution or winding up; or

·repeal, amend or otherwise change any of the provisions applicable to the Series E Preferred Stock in any manner which materially and adversely affects the powers, preferences, voting power or other rights or privileges of the Series E Preferred Stock. However, an increase in the amount of authorized preferred stock, the creation or issuance of other classes or series of preferred stock or any increase in the amount of authorized shares of Series E Preferred Stock or of any other class or series of preferred stock, in each case ranking on a parity with or junior to the Series E Preferred Stock, will not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.

The consent of the holders of Series E Preferred Stock is not required for the taking of any corporate action, including any merger or consolidation involving us or a sale of all or substantially all of our assets, regardless of the effect that such merger, consolidation or sale may have upon the rights, preferences or voting power of the holders of the Series E Preferred Stock, except as expressly set forth in the provisions of our charter.

Rank

With respect to dividend rights and rights upon liquidation, dissolution or winding up of HCP, the Series E Preferred Stock ranks:

·senior to the common stock, and to all equity securities issued by us ranking junior to the Series E Preferred Stock with respect to dividend rights or rights upon liquidation, dissolution or winding up of HCP;

·on a parity with all equity securities issued by us the terms of which specifically provide that such equity securities rank on a parity with the Series E Preferred Stock with respect to dividend rights or rights upon liquidation, dissolution or winding up of HCP; and

·junior to all equity securities issued by us the terms of which specifically provide that such equity securities rank senior to the Series E Preferred Stock with respect to dividend rights or rights upon liquidation, dissolution or winding up of HCP.

The term “equity securities” does not include convertible debt securities, which rank senior to the Series E Preferred Stock prior to conversion.

Dividends

Holders of shares of the Series E Preferred Stock are entitled to receive, when, as, and if declared by our board out of funds legally available for the payment of dividends, cumulative preferential annual cash dividends at the rate of 7.25% of the liquidation preference (equivalent to $1.8125 per annum per share).

Dividends on the Series E Preferred Stock are cumulative from the date of original issue and payable quarterly in arrears on or about the last day of each March, June, September and December or, if not a business day, the next succeeding business day.

No dividends may be declared by our board or paid or set apart for payment on the Series E Preferred Stock if the terms of any of our agreements, including any agreement relating to its indebtedness, prohibits such a declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach of or default under such an agreement. Likewise, no dividends may be declared by our board or paid or set apart for payment if such declaration or payment is restricted or prohibited by law.

Dividends on the Series E Preferred Stock accrue, however, whether or not we have earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Accrued but unpaid dividends on the Series E Preferred Stock do not bear interest and holders of the Series E Preferred Stock are not entitled to any dividends in excess of full cumulative dividends described above. Any dividend payment made on the Series E Preferred Stock is first credited against the earliest accrued but unpaid dividend due that remains payable.

No full dividends may be declared or paid or set apart for payment on any class or series of preferred stock ranking, as to dividends, on a parity with or junior to the Series E Preferred Stock, other than a dividend in shares of any class of stock ranking junior to the Series E Preferred Stock as to dividends and upon liquidation, for any period unless full cumulative dividends have been

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or contemporaneously are declared and paid or declared and set apart for such payment on the Series E Preferred Stock for all past dividend periods and the then current dividend period. When dividends are not paid in full, or full payment is not so set apart, upon the Series E Preferred Stock and the shares of any other class or series of preferred stock ranking on a parity as to dividends with the Series E Preferred Stock, all dividends declared upon the Series E Preferred Stock and any other class or series of preferred stock ranking on a parity as to dividends with the Series E Preferred Stock are declared pro rata so that the amount of dividends declared per share of Series E Preferred Stock and such other class or series of preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Series E Preferred Stock and such other class or series of preferred stock, which cannot include any accrual in respect of unpaid dividends for prior dividend periods if such preferred stock does not have a cumulative dividend, bear to each other.

Except as provided in the preceding paragraph, unless full cumulative dividends on the Series E Preferred Stock have been or contemporaneously are declared and paid or declared and set apart for payment for all past dividend periods and the then current dividend period, then, other than the payment of dividends in shares of common stock or other shares of capital stock ranking junior to the Series E Preferred Stock as to dividends and upon liquidation:

·no dividends may be declared or paid or set aside for payment upon the common stock, or any other of our capital stock ranking junior to or on a parity with the Series E Preferred Stock as to dividends or upon liquidation;

·no other distribution may be declared or made upon the common stock, or any other of our capital stock ranking junior to or on a parity with the Series E Preferred Stock as to dividends or upon liquidation; and

·no shares of common stock, or any other shares of our capital stock ranking junior to or on a parity with the Series E Preferred Stock as to dividends or upon liquidation may be redeemed, purchased or otherwise acquired for any consideration by us, except by conversion into or exchange for other of our capital stock ranking junior to the Series E Preferred Stock as to dividends and upon liquidation or for the purpose of preserving our qualification as a real estate investment trust.

Liquidation Preferences

Upon any liquidation, dissolution or winding up of the affairs of HCP, the holders of Series E Preferred Stock are entitled to be paid out of our assets legally available for distribution to our stockholders a liquidation preference of $25 per share, plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribution of assets is made to holders of common stock or any other class or series of our capital stock that ranks junior to the Series E Preferred Stock as to liquidation rights.

In determining whether a distribution (other than upon voluntary or involuntary liquidation) by dividend, redemption or other acquisition of shares of our stock or otherwise is permitted under the Maryland General Corporation Law (“MGCL”), no effect is given to amounts that would be needed if we would be dissolved at the time of the distribution, to satisfy the preferential rights upon distribution of holders of shares of our stock whose preferential rights upon distribution are superior to those receiving the distribution.

Maturity; Redemption

The Series E Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption. The Series E Preferred Stock is not redeemable prior to September 15, 2008. We are entitled, however, to purchase shares of the Series E Preferred Stock in order to preserve our status as a real estate investment trust for federal or state income tax purposes at any time. Following September 15, 2008, we may, at our option, redeem the Series E Preferred Stock at $25 per share ($100,000,000 in the aggregate), plus accrued and unpaid dividends.

Transfer and Ownership Restrictions

See “—Transfer and Ownership Restrictions Relating to Our Preferred Stock.”

Series F Preferred Stock

Voting Rights

Holders of the Series F Preferred Stock generally do not have any voting rights, except in limited circumstances.

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If dividends on any shares of Series F Preferred Stock are in arrears for six or more quarterly periods, whether or not consecutive, the holders of Series F Preferred Stock (voting separately as a class with all other classes or series of preferred stock upon which like voting rights have been conferred and are exercisable, including the Series E Preferred Stock) are entitled to vote for the election of a total of two additional directors of HCP at a special meeting called by the holders of record of at least 25% of the Series F Preferred Stock or the holders of any other class or series of preferred stock so in arrears or at the next annual meeting of stockholders. These voting rights continue at each subsequent annual meeting until all dividends accumulated on such shares of Series F Preferred Stock for the past dividend periods and the dividend for the then current dividend period shall have been fully paid or declared and set aside for payment. In such case, our entire board is increased by two directors.

So long as any shares of Series F Preferred Stock remain outstanding, we shall not, without the consent or the affirmative vote of the holders of at least two-thirds of the shares of Series F Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting, with the Series F Preferred Stock voting separately as a class:

·authorize, create or issue, or increase the authorized or issued amount of, any class or series of stock ranking prior to the Series F Preferred Stock with respect to the payment of dividends, or the distribution of assets on liquidation, dissolution or winding up;

·reclassify any of our authorized stock into any such shares, or authorize, create or issue any obligation or security convertible into or evidencing the right to purchase any class or series of stock ranking prior to the Series F Preferred Stock with respect to the payment of dividends, or the distribution of assets on liquidation, dissolution or winding up; or

·repeal, amend or otherwise change any of the provisions applicable to the Series F Preferred Stock in any manner which materially and adversely affects the powers, preferences, voting power or other rights or privileges of the Series F Preferred Stock. However, an increase in the amount of authorized preferred stock, the creation or issuance of other classes or series of preferred stock or any increase in the amount of authorized shares of Series F Preferred Stock or of any other class or series of preferred stock, in each case ranking on a parity with or junior to the Series F Preferred Stock, will not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.

The consent of the holders of Series F Preferred Stock is not required for the taking of any corporate action, including any merger or consolidation involving us or a sale of all or substantially all of our assets, regardless of the effect that such merger, consolidation or sale may have upon the rights, preferences or voting power of the holders of the Series F Preferred Stock, except as expressly set forth in the provisions of our charter.

Rank

With respect to dividend rights and rights upon liquidation, dissolution or winding up of HCP, the Series F Preferred Stock ranks:

·senior to the common stock, and to all equity securities issued by us ranking junior to the Series F Preferred Stock with respect to dividend rights or rights upon liquidation, dissolution or winding up of HCP;

·on a parity with the Series E Preferred Stock and with all equity securities issued by us the terms of which specifically provide that such equity securities rank on a parity with the Series F Preferred Stock with respect to dividend rights or rights upon liquidation, dissolution or winding up of HCP; and

·junior to all equity securities issued by us the terms of which specifically provide that such equity securities rank senior to the Series F Preferred Stock with respect to dividend rights or rights upon liquidation, dissolution or winding up of HCP.

The term “equity securities” does not include convertible debt securities, which rank senior to the Series F Preferred Stock prior to conversion.

Dividends

Holders of the Series F Preferred Stock are entitled to receive, when, as, and if declared by our board, out of funds legally available for the payment of dividends, cumulative preferential annual cash dividends at the rate of 7.10% of the liquidation preference (equivalent to $1.775 per annum per share).

Dividends on the Series F Preferred Stock are cumulative from the date of original issue and payable quarterly in arrears on or about the last day of each March, June, September and December or, if not a business day, the next succeeding business day. Any

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dividend payable on the Series F Preferred Stock, including dividends payable for any partial dividend period, are computed on the basis of a 360-day year consisting of twelve 30-day months.

No dividends may be declared by our board or paid or set apart for payment on the Series F Preferred Stock if the terms of any of our agreements, including any agreement relating to its indebtedness, prohibits such a declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach of or default under such an agreement. Likewise, no dividends may be declared by our board or paid or set apart for payment if such declaration or payment is restricted or prohibited by law.

Dividends on the Series F Preferred Stock accrue, however, whether or not we have earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Accrued but unpaid dividends on the Series F Preferred Stock do not bear interest and holders of the Series F Preferred Stock are not entitled to any dividends in excess of full cumulative dividends described above. Any dividend payment made on the Series F Preferred Stock is first credited against the earliest accrued but unpaid dividend due that remains payable.

No full dividends may be declared or paid or set apart for payment on any class or series of preferred stock ranking, as to dividends, on a parity with or junior to the Series F Preferred Stock, other than a dividend in shares of any class of stock ranking junior to the Series F Preferred Stock as to dividends and upon liquidation, for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and set apart for such payment on the Series F Preferred Stock for all past dividend periods and the then current dividend period. When dividends are not paid in full (or full payment is not so set apart) upon the Series F Preferred Stock and the shares of any other class or series of preferred stock ranking on a parity as to dividends with the Series F Preferred Stock, including the Series E Preferred Stock, all dividends declared upon the Series F Preferred Stock and any other class or series of preferred stock ranking on a parity as to dividends with the Series F Preferred Stock are declared pro rata so that the amount of dividends declared per share of Series F Preferred Stock and such other class or series of preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Series F Preferred Stock and such other class or series of preferred stock, which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such preferred stock does not have a cumulative dividend, bear to each other.

Except as provided in the preceding paragraph, unless full cumulative dividends on the Series F Preferred Stock have been or contemporaneously are declared and paid or declared and set apart for payment for all past dividend periods and the then current dividend period, then, other than the payment of dividends in shares of common stock or other shares of capital stock ranking junior to the Series F Preferred Stock as to dividends and upon liquidation:

·no dividends may be declared or paid or set aside for payment upon the common stock, or any other of our capital stock  ranking junior to or on a parity with the Series F Preferred Stock as to dividends or upon liquidation;

·no other distribution may be declared or made upon the common stock, or any other of our capital stock ranking junior to or on a parity with the Series F Preferred Stock as to dividends or upon liquidation; and

·no shares of common stock, or any other shares of our capital stock ranking junior to or on a parity with the Series F Preferred Stock as to dividends or upon liquidation may be redeemed, purchased or otherwise acquired for any consideration by us, except by conversion into or exchange for other of our capital stock ranking junior to the Series F Preferred Stock as to dividends and upon liquidation or for the purpose of preserving our qualification as a real estate investment trust.

Liquidation Preferences

Upon any liquidation, dissolution or winding up of the affairs of HCP, the holders of Series F Preferred Stock are entitled to be paid out of our assets legally available for distribution to our stockholders a liquidation preference of $25 per share, plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribution of assets is made to holders of common stock or any other class or series of our capital stock that ranks junior to the Series F Preferred Stock as to liquidation rights.

In determining whether a distribution, other than upon voluntary or involuntary liquidation, by dividend, redemption or other acquisition of shares of our stock or otherwise is permitted under the MGCL, no effect is given to amounts that would be needed if we would be dissolved at the time of the distribution, to satisfy the preferential rights upon distribution of holders of shares of our stock whose preferential rights upon distribution are superior to those receiving the distribution.

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Maturity; Redemption

The Series F Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption. The Series F Preferred Stock is not redeemable prior to December 3, 2008. We are entitled, however, to purchase shares of the Series F Preferred Stock in order to preserve our status as a real estate investment trust for federal or state income tax purposes at any time. Following December 3, 2008, we may, at our option, redeem the Series F Preferred Stock at $25 per share ($195,500,000 in the aggregate), plus accrued and unpaid dividends.

Transfer and Ownership Restrictions

See “—Transfer and Ownership Restrictions Relating to Our Preferred Stock.”

TRANSFER AND OWNERSHIP RESTRICTIONS RELATING TO OUR COMMON STOCK

Our charter contains restrictions on the ownership and transfer of our voting stock that are intended to assist us in complying with the requirements to continue to qualify as a REIT. Subject to limited exceptions, no person or entity may own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Internal Revenue Code, more than 9.8% (by number or value, whichever is more restrictive) of the outstanding shares of our common stock. Our board may, but is in no event required to, waive the applicable ownership limit with respect to a particular stockholder if it determines that such ownership will not jeopardize our status as a REIT and our board otherwise decides such action would be in our best interests.

These charter provisions further prohibit:

·any person from actually or constructively owning shares of our stock that would result in our being “closely held” under Section 856(h) of the Internal Revenue Code or otherwise cause us to fail to qualify as a real estate investment trust (including but not limited to ownership that would result in us owning, actually or constructively, an interest in a tenant as described in Section 856(d)(2)(B) of the Internal Revenue Code if the income derived by us, either directly or indirectly, from such tenant would cause us to fail to satisfy any of the gross income requirements of Section 856(c) of the Internal Revenue Code); and

·any person from transferring shares of our capital stock if such transfer would result in shares of our stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution).

Any person who acquires or attempts or intends to acquire actual or constructive ownership of shares of our stock that will or may violate any of these restrictions on ownership and transfer is required to give notice immediately to us and provide us with such other information as we may request in order to determine the effect of the transfer on our status as a REIT. Under our charter, if any purported transfer of our stock or any other event would otherwise result in any person violating the applicable ownership limit or such other limit as permitted by our board, then any such purported transfer is void and of no force or effect with respect to the purported transferee as to that number of shares of our stock in excess of the ownership limit or such other limit, and the transferee will acquire no right or interest in such excess shares. Any excess shares described above are transferred automatically, by operation of law, to a trust, the beneficiary of which is a qualified charitable organization selected by us. Such automatic transfer will be deemed to be effective as of the close of business on the business day prior to the date of such violative transfer. Within 20 days of receiving notice from us of the transfer of shares to the trust, the trustee of the trust is required to sell the excess shares to a person or entity who could own the shares without violating the applicable ownership limit, or such other limit as permitted by our board, and distribute to the prohibited transferee an amount equal to the lesser of the price paid by the prohibited transferee for the excess shares or the sales proceeds received by the trust for the excess shares. Any proceeds in excess of the amount distributable to the prohibited transferee are distributed to the beneficiary of the trust. Prior to a sale of any such excess shares by the trust, the trustee is entitled to receive, in trust for the beneficiary, all dividends and other distributions paid by us with respect to such excess shares, and also is entitled to exercise all voting rights with respect to such excess shares.

Subject to Maryland law, effective as of the date that such shares have been transferred to the trust, the trustee will have the authority, at the trustee’s sole discretion:

·to rescind as void any vote cast by a prohibited transferee prior to the discovery by us that the shares have been transferred to the trust; or

·to recast such vote in accordance with the desires of the trustee acting for the benefit of the beneficiary of the trust.

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However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind and recast such vote. Any dividend or other distribution paid to the prohibited transferee, prior to the discovery by us that such shares had been automatically transferred to a trust as described above, are required to be repaid to the trustee upon demand for distribution to the beneficiary of the trust. In the event that the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the ownership limit or such other limit as permitted by our board, then our charter provides that the transfer of the excess shares is void ab initio.

In addition, shares of common stock held in the trust shall be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of:

·the price per share in the transaction that resulted in such transfer to the trust or, in the case of a devise or gift, the market price at the time of such devise or gift; and

·the market price on the date we, or our designee, accepted the offer.

We will have the right to accept the offer until the trustee has sold the shares of stock held in the trust. Upon a sale to us, the interest of the beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited transferee.

If any purported transfer of shares of common stock would cause us to be beneficially owned by fewer than 100 persons, such transfer will be null and void ab initio in its entirety and the intended transferee will acquire no rights to the stock.

All certificates representing shares of common stock bear a legend referring to the restrictions described above. The foregoing ownership limitations could delay, defer or prevent a transaction or a change in control of us that might involve a premium price for the common stock or otherwise be in the best interest of our stockholders.

In addition, if our board of directors shall, at any time and in good faith, be of the opinion that direct or indirect ownership of at least 9.9% of the voting shares of capital stock has or may become concentrated in the hands of one beneficial owner, it shall have the power:

·by lot or other means deemed equitable by it to call for the purchase from any stockholder of a number of voting shares sufficient, in the opinion of our board of directors, to maintain or bring the direct or indirect ownership of voting shares of capital stock of the beneficial owner to a level of no more than 9.9% of our outstanding voting shares; and

·to refuse to transfer or issue voting shares of capital stock to any person whose acquisition of such voting shares would, in the opinion of the board of directors, result in the direct or indirect ownership by that person of more than 9.9% of the outstanding voting shares of our capital stock.

If our board of directors fails to grant an exemption from this 9.9% ownership limitation, then the transfer of shares, options, warrants, or other securities convertible into voting shares that would create a beneficial owner of more than 9.9% of the outstanding voting shares shall be deemed void ab initio, and the intended transferee shall be deemed never to have had an interest in the transferred securities. The purchase price for any voting shares of capital stock so redeemed shall be equal to the fair market value of the shares reflected in the closing sales price for the shares, if then listed on a national securities exchange, or the average of the closing sales prices for the shares if then listed on more than one national securities exchange, or if the shares are not then listed on a national securities exchange, the latest bid quotation for the shares if then traded over-the-counter, on the last business day immediately preceding the day on which we send notices of such acquisitions, or, if no such closing sales prices or quotations are available, then the purchase price shall be equal to the net asset value of such stock as determined by the board of directors in accordance with the provisions of applicable law. From and after the date fixed for purchase by the board of directors, the holder of any shares so called for purchase shall cease to be entitled to distributions, voting rights and other benefits with respect to such shares, except the right to payment of the purchase price for the shares.

BUSINESS COMBINATION PROVISIONS

Our charter requires that, except in some circumstances, “business combinations” between us and a beneficial holder of 10% or more of our outstanding voting stock (a “Related Person”) be approved by the affirmative vote of at least 90% of our outstanding voting shares. A “business combination” is defined in our charter as:

·any merger or consolidation with or into a Related Person;

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·any sale, lease, exchange, transfer or other disposition, including without limitation a mortgage or any other security device, of all or any “Substantial Part” (as defined below) of our assets, including any voting securities of a subsidiary, to a Related Person;

·any merger or consolidation of a Related Person with or into us;

·any sale, lease, exchange, transfer or other disposition of all or any Substantial Part of the assets of a Related Person to us;

·the issuance of any of our securities, other than by way of pro rata distribution to all stockholders, to a Related Person; and

·any agreement, contract or other arrangement providing for any of the transactions described above.

The term “Substantial Part” means more than 10% of the book value of our total assets as of the end of our most recent fiscal year ending prior to the time the determination is being made.

In addition to the restrictions on business combinations contained in our charter, Maryland law also contains restrictions on business combinations. See “Provisions of Maryland Law and HCP’s Charter and Bylaws—Business Combinations.”

The foregoing provisions may have the effect of discouraging unilateral tender offers or other takeover proposals which stockholders might deem to be in their interests or in which they might receive a substantial premium. The HCP board’s authority to issue and establish the terms of currently authorized preferred stock, without stockholder approval, may also have the effect of discouraging takeover attempts. See “—Preferred Stock.”

The foregoing provisions could also have the effect of insulating current management against the possibility of removal and could, by possibly reducing temporary fluctuations in market price caused by accumulations of shares of our common stock, deprive stockholders of opportunities to sell at a temporarily higher market price. Our board believes, however, that inclusion of the business combination provisions in our charter may help assure fair treatment of our stockholders and preserve our assets.

TRANSFER AND OWNERSHIP RESTRICTIONS RELATING TO OUR PREFERRED STOCK

Our charter contains restrictions on the ownership and transfer of preferred stock that are intended to assist us in complying with the requirements to maintain its status as a REIT. Subject to limited exceptions, no person or entity may own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Internal Revenue Code, more than 9.8% (by number or value, whichever is more restrictive) of the outstanding shares of Series E Preferred Stock or Series F Preferred Stock. Our board of directors may, but in no event is required to, waive the applicable ownership limit with respect to a particular stockholder if it determines that such ownership will not jeopardize our status as a REIT and our board of directors otherwise decides such action would be in our best interests. The mechanics for the ownership limits on our preferred stock are similar to the mechanics related to our common stock, as described in “Transfer and Ownership Restrictions Relating to Our Common Stock” above.

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OPERATING AGREEMENT

The following summarizes the material provisions of the Amended and Restated Limited Liability Company Agreement of HCP DR California, LLC, dated as of July 22, 2005, which we refer to as the “operating agreement.”  The summary is qualified in its entirety by reference to the operating agreement, which is filed as an exhibit to the registration statement of which this prospectus is a part and which is incorporated by reference herein.

Management

HCP DR California, LLC is organized as a Delaware limited liability company under the Delaware Limited Liability Company Act and the terms of its operating agreement, the Amended and Restated Limited Liability Company Agreement of HCP DR California, LLC, as the same has been amended to date. Our company is the sole managing member of HCP DR California, LLC. Generally, pursuant to the operating agreement, we have exclusive and complete responsibility and discretion in the management and control of HCP DR California, LLC, including, subject to the restrictions discussed below, the ability to cause it to enter into major transactions such as acquisitions, dispositions, financings, and refinancings, and to manage and operate its properties. We may not be removed as the managing member of HCP DR California, LLC, with or without cause, unless we consent to being removed. Non-managing members of HCP DR California, LLC have no authority to transact business for HCP DR California, LLC or participate in its management activities, except in limited circumstances described below and as required by any non-waivable provision of applicable law.

As the managing member, we may not take any action in contravention of the operating agreement, including:

·taking any action that would make it impossible to carry out the ordinary business of HCP DR California, LLC;

·possessing or assigning any rights in specific property owned by HCP DR California, LLC, other than for an HCP DR California, LLC purpose, except those acts permitted by the operating agreement;

·taking any action that would cause a non-managing member to be subject to liability as a managing member, except those acts permitted by the operating agreement and by law;

·entering into any agreement that would have the effect of restricting a member of HCP DR California, LLC from exercising its right to redeem its units as provided in the operating agreement and discussed below under “Redemption Rights,” or the effect of restricting HCP DR California, LLC or us from satisfying our obligations under this agreement to effect such a redemption, except, in either case, if such member gives its prior written consent to such action; or

·entering into any agreement that would have the effect of restricting HCP DR California, LLC’s ability to make distributions to its members, without the written consent of each member affected by the restriction.

The consent of the holders of a majority of the outstanding non-managing member units is required before we will be permitted to take the following extraordinary actions involving HCP DR California, LLC:

·the amendment, modification or termination of the operating agreement other than to reflect the permitted admission, substitution, termination or withdrawal of members or in connection with a permitted dissolution or termination of HCP DR California, LLC;

·approving or acquiescing to the transfer of all or a portion of the membership interest held by us, other than a transfer to an affiliate whose obligations under the operating agreement are guaranteed by us;

·the admission of any additional members in HCP DR California, LLC;

·making a general assignment for the benefit of HCP DR California, LLC’s creditors, permitting the appointment of a custodian for any part of assets of HCP DR California, LLC, or instituting any proceeding for bankruptcy on behalf of HCP DR California, LLC;

·acquiring any properties, other than the initial contributed properties of the non-managing members, successor properties or any assets subsequently acquired that are directly related to such properties; and

·incurring debt in violation of the operating agreement.

In addition to the above restrictions, we, as the managing member, may not amend the operating agreement or take any action without the consent of each non-managing member who would be adversely affected if such amendment or action would:

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·convert a non-managing member’s interest in HCP DR California, LLC into a managing member interest;

·modify the limited liability of a non-managing member;

·alter the rights of a member to receive distributions or the allocation of income and loss to a member;

·materially alter the right of a member to redeem its non-managing member units or the right of a member to receive a make-whole payment as set forth in the operating agreement; or

·alter or modify the section governing the transfer of the managing member’s membership interest.

As managing member, we may, however, amend the operating agreement without non-managing member consent:

·to reflect the issuance of additional membership interests in exchange for capital contributions of cash or property, or the admission, substitution, termination or withdrawal of members as permitted by the operating agreement;

·to reflect inconsequential changes that do not adversely affect the non-managing members or to cure ambiguities and make other changes not inconsistent with law or the provisions of the operating agreement;

·to satisfy any requirements, conditions or guidelines contained in any governmental order or required by law;

·to reflect changes that are reasonably necessary for us to maintain our status as a REIT;

·to modify the manner in which capital accounts are computed; and

·to add to our obligations or surrender any right or power granted to us or any of our affiliates for the benefit of a non-managing member.

In general, until the earlier of (i) July 22, 2015 or (ii) such time as the initial non-managing members of HCP DR California, LLC (consisting of the non-managing members, or successors thereto, that were issued non-managing member units on July 22, 2005) have disposed of, in taxable transactions, 80% of the non-managing member units issued to them in exchange for their contribution of property to HCP DR California, LLC, HCP DR California, LLC will be required to pay to the non-managing members a “make whole payment” in an amount equal to the aggregate federal, state and local income taxes incurred by the non-managing member as a result of the following actions, if such actions are undertaken without the consent of the holders of a majority of the non-managing member units held by non-managing members (excluding any non-managing member units held by the managing member):

·cause or permit HCP DR California, LLC to merge with another entity (except with a subsidiary), sell all or substantially all of HCP DR California, LLC’s assets (except to a subsidiary) or reclassify the outstanding equity interests of HCP DR California, LLC;

·sell, dispose, convey or otherwise transfer certain of the properties of HCP DR California, LLC in a transaction that causes holders of non-managing member units to recognize certain taxable income, other than as a result of a casualty loss, taking by eminent domain (other than a disposition resulting from the mere threat of eminent domain) or pursuant to the exercise of certain purchase rights provided that HCP DR California, LLC has first used commercially reasonable efforts to structure such disposition as either a tax-free like-kind exchange under Section 1031 of the Internal Revenue Code or as a tax-free investment under Section 1033 of the Internal Revenue Code;

·replace or refinance specified indebtedness of HCP DR California, LLC, unless such indebtedness:

·is refinanced with indebtedness that does not require principal repayments that would cause the principal balance of such replacement indebtedness to be less than the principal balance of the existing or replacement indebtedness replaced by such indebtedness;

·is either (i) provided by a lender that has no equity interest in HCP DR California, LLC and is not related to HCP DR California, LLC or (ii) of a nature and source to not disqualify the guarantee of the debt from preventing the recapture pursuant to Section 465(e) of the Internal Revenue Code of losses claimed by a non-managing member prior to the closing date;

·satisfies either of the following requirements (i) the fair market value of the collateral is not less than 133% of the sum of (x) the amount of the guarantees provided by non-managing members under the operating agreement, plus (y) the

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dollar amount of any other indebtedness (with recourse against the collateral) that is senior or pari passu with the indebtedness, plus (z) the aggregate amount of any other guarantees that are pari passu with, or at a lower level risk than, the guarantees provided by the non-managing parties pursuant to the operating agreement, or (ii) the indebtedness is general recourse liability of HCP DR California, LLC under which the lender is not limited in its recourse to the assets of HCP DR California, LLC; and

·either (i) is not subject to a guarantee, reimbursement or indemnity agreement provided by any person other than HCP DR California, LLC or a non-managing member that is executing such an agreement pursuant to the operating agreement, or other than a customary nonrecourse carve-out guarantee, environmental indemnity or similar guarantee or indemnity given by us or our affiliates or (ii) does not have any person who might be considered to “bear the economic risk of loss” or to be “at risk” with respect to such indebtedness unless such person is us or one of our affiliates and the initial non-managing members are permitted to enter into an indemnity agreement with such person to cause such non-managing member to “bear the economic risk of loss” or to be “at risk” with respect to such indebtedness vis-à-vis such person; or

·prepay the specified indebtedness, including replacement indebtedness assumed or taken subject to a transaction qualifying under Section 1031 of the Internal Revenue Code;

·fail to provide non-managing members the opportunity to guaranty the indebtedness of HCP DR California, LLC in an amount up to the non-managing member’s share of the total debt amount (initially $25.7 million), as determined by the non-managing member representative; or

·dissolve HCP DR California LLC.

In addition, a non-managing member will also be entitled to receive a make whole payment in the event of the exercise of such non-managing member’s redemption right under the operating agreement after receipt by such non-managing member of a written notice of a liquidating event provided by HCP DR California, LLC to the same extent such non-managing member would have been entitled to such make whole payment had such non-managing member not have been redeemed pursuant to such redemption.

Transferability of Interests

The operating agreement provides that a non-managing member may transfer its non-managing member units only after first offering those non-managing member units to us or otherwise obtaining our consent, except that a non-managing member may, without obtaining our consent, pledge its membership interest as security for the repayment of debt and transfer such membership interest to the lender upon the foreclosure of such debt if such transfer would not otherwise violate the terms of the operating agreement. A non-managing member may also, without our consent, transfer its membership interest in HCP DR California, LLC by assignment to a partner in such non-managing member in liquidation of that partner’s interest in such non-managing member, a family member of such non-managing member, a trust the beneficiaries of which include only such non-managing member and family members of such non-managing member, a corporation, general or limited partnership or limited liability company of which the owners include only such non-managing member and family members of such non-managing member, or to an organization described in Sections 170(b)(1)(A), 170(c)(2) or 501(c)(3) of the Internal Revenue Code. The operating agreement further imposes the following restrictions on the transfer of the non-managing member units:

·the person to whom any non-managing member units are transferred must assume all of the obligations of the transferor under the operating agreement;

·we will have the right to receive an opinion of counsel that the proposed transfer may be effected without registration under the Securities Act and will not otherwise violate any federal or state securities laws or regulations;

·we may prohibit any transfer otherwise permitted under the operating agreement if such transfer would require the filing of a registration statement under the Securities Act by HCP DR California, LLC or would otherwise violate any applicable federal or state securities laws or regulations;

·no transfer may be made to any person without our consent if such transfer could, as reasonably determined by us, (1) result in HCP DR California, LLC being treated as an association taxable as a corporation or for state income or franchise tax purposes, (2) adversely affect our ability to qualify as a REIT or subject us to additional taxes under Sections 857 or 4981 of the Internal Revenue Code or (3) be treated as having been effected through an “established securities market” or a “secondary market” within the meaning of Section 7704 of the Internal Revenue Code, or such transfer fails to satisfy a “safe harbor” preventing such treatment;

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·no transfer may be made to a lender of HCP DR California, LLC or any person related to such a lender whose loan constitutes “nonrecourse liability” within the meaning of the Internal Revenue Code, without our consent as managing member;

·transfers may be made only as of the first day of a calendar quarter of HCP DR California, LLC, unless we otherwise consent; and

·no transfer may be made (1) to any person or entity who lacks the legal right, power or capacity to own a membership interest; (2) in violation of applicable law; (3) if such transfer would, in the opinion of legal counsel to HCP DR California, LLC, cause an increased tax liability to any other member as a result of the termination of HCP DR California, LLC; (4) if such transfer could cause HCP DR California, LLC to become a “party in interest” within the meaning of ERISA or a “disqualified person” within the meaning of Section 4975(c) of the Internal Revenue Code; (5) if such transfer could cause HCP DR California, LLC to become a reporting company under the Exchange Act; (6) if such transfer could, in the opinion of legal counsel to HCP DR California, cause any portion of the assets of HCP DR California to constitute assets of any employee benefit plan pursuant to Department of Labor regulations; (7) in such transfer could subject HCP DR California to regulation under the Investment Company Act of 1940, the Investment Advisory Act of 1940 or ERISA, each as amended; or (8) if such transfer could result in HCP DR California having more than 100 members.

Capital Contributions

The operating agreement provides that if HCP DR California, LLC requires additional funds for its operation, we may fund those investments by making a capital contribution to HCP DR California, LLC. If we fund a capital contribution, we have the right to receive additional managing member units. In the event we receive additional managing member units in return for additional capital contributions, our membership interest in HCP DR California, LLC will be increased. Non-managing members of HCP DR California, LLC do not have the right to make additional capital contributions to HCP DR California, LLC unless permitted to do so by us in our discretion. Accordingly, the membership interest of non-managing members in HCP DR California, LLC will be diluted to the extent we receive an additional membership interest.

Tax Matters

Pursuant to the operating agreement, we are the tax matters partner of HCP DR California, LLC. The tax matters partner serves as HCP DR California, LLC’s representative in most tax matters. For example, as the tax matters partner, we have the authority to file tax returns and make elections for HCP DR California, LLC, conduct audits, file refund claims on behalf of HCP DR California, LLC and settle adjustments; provided, however, that, prior to the date on which the initial non-managing members have disposed of, in taxable transactions, 80% of the non-managing member units issued to them, the approval of the non-managing member representative (which approval or disapproval shall not be unreasonably withheld or delayed) shall be required to settle any administrative proceeding or institute or settle any litigation with respect to tax issues if such action (a) is reasonably likely to materially and adversely affect the non-managing members in the aggregate, and (b) does not relate to our tax status as a REIT. In addition, as the tax matters partner, we will receive notices and other information from the Internal Revenue Service. The designation of HCP as the tax matters partner of HCP DR California, LLC is not directly relevant to our tax status as a REIT.

Operations

The sole purposes of HCP DR California, LLC are to acquire, own, manage, operate, repair, renovate, maintain, improve, expand, redevelop, encumber, sell, lease, hold for appreciation or otherwise dispose of the real properties contributed to it, and any other properties acquired by it, and to invest and ultimately distribute funds, including, without limitation, obtained from owning, operating or disposing of such properties. The operating agreement provides, however, that we, as managing member, may operate HCP DR California, LLC in a manner that will enable us to continue to qualify as a REIT and avoid subjecting us to any additional federal income tax liability under Section 857 or 4981 of the Internal Revenue Code. Under the operating agreement, HCP DR California, LLC assumes and pays when due, or reimburses us for payment of, all costs and expenses that we incur for the benefit of or relating to its operation.

Distributions

Holders of non-managing member units are entitled to receive cumulative preferential distributions from the date of issuance of those non-managing member units, payable on a quarterly basis. The right of holders of non-managing member units to receive cumulative preferential distributions means that, unless and until each of those quarterly distributions are paid in full, HCP DR California, LLC cannot make any distributions to us. These preferred distributions are an amount per unit equal to the amount payable with respect to each share of our common stock for the corresponding quarter (subject to adjustment in the event we pay a dividend or distribution on our common stock in shares of our common stock, split or subdivide our common stock or effect a reverse stock split

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or other combination of our common stock into a smaller number of shares). Following the payment of the preferred distribution to holders of the non-managing member units, HCP DR California, LLC is required to distribute the remaining cash available for distribution to us until all distributions of cash, including prior distributions, have been made to the members of HCP DR California, LLC pro rata on the basis of the number of managing member or non-managing member units held by them as compared to the total number of managing member and non-managing member units then outstanding. Thereafter, the remaining cash available for distribution may be distributed, in our sole discretion, to the unitholders in proportion to their Sharing Percentages. The “Sharing Percentage” of a holder of non-managing member units (including us with respect to any non-managing member units held by us) is determined by multiplying 1% by a fraction, the numerator of which is the number of non-managing member units then outstanding and the denominator of which is the number of non-managing member units issued to the non-managing members, and multiplying the result by a fraction, the numerator of which is the number of non-managing member units held by such unitholder, and the denominator of which is the total number of non-managing member units then outstanding. Our “Sharing Percentage,” as the managing member of HCP DR California, LLC, in our capacity as such, is equal to 100% minus the aggregate Sharing Percentage of the holders of non-managing member units.

In the event of a taxable disposition of some of HCP DR California, LLC’s real property, we may elect to distribute all or a portion of the net proceeds of the taxable disposition to the members. In this event, we must distribute these proceeds as follows:

·first, to holders of non-managing member units to pay any previously unpaid preferred distribution on the non-managing member units held by them;

·second, to us until we have received an amount equal to the excess of (a) the amount of cash that must be distributed to us such that the aggregate distributions of cash have been made to all members of HCP DR California, LLC pro rata on the basis of the number of managing member or non-managing member units held by them as compared to the total number of managing member and non-managing member units then outstanding, over (b) the sum of certain prior distributions to us;

·third, to the holders of managing member units and non-managing member units in proportion to the number of managing member units and non-managing member units held by them in redemption of those units, as discussed below, until all non-managing member units have been redeemed; and

·finally, the remaining balance to us.

The distribution of the net proceeds from the taxable disposition of real property will constitute a return of capital to the unitholders of HCP DR California, LLC.  As such, we will cause HCP DR California, LLC to reduce the number of units outstanding at the time of such distributions by causing managing and non-managing member units to be redeemed.

Upon the refinancing of a property or the incurrence of additional debt, the repayment of which is secured by a property owned by HCP DR California, LLC, we may elect to distribute all or a portion of the refinancing or other debt proceeds to the members. In this event, we must distribute such proceeds as follows:

·first, to the holders of non-managing member units to pay any previously unpaid preferred distribution on the non-managing member units held by them; and

·second, the remaining balance to the members in accordance with their Sharing Percentages.

Allocation of Income and Loss

The operating net income and net loss of HCP DR California, LLC is generally allocated as follows:

·operating net loss for any fiscal year is allocated to the members in accordance with their Sharing Percentages;

·operating net income for any fiscal year is allocated as follows:

·first, to each member to the extent necessary to offset any operating net loss previously allocated to such member;

·second, to each member in an amount that will cause the current allocation, together with all previous allocations of operating net income and net income resulting from the disposition of real property, to be in proportion to and to the extent of the cumulative distributions received by such member for the current and all prior fiscal years; and

·thereafter, the remaining balance to the members pro rata in accordance with their Sharing Percentages.

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In the event HCP DR California, LLC sells or otherwise disposes of any of its real properties, however, the net income or net loss attributable to such sale or disposition is generally allocated as follows:

·net loss attributable to the sale or other disposition of real property is allocated to the holders of units in proportion to their Sharing Percentages; and

·net income attributable to the sale or other disposition of real property is allocated as follows:

·first, to each member to the extent necessary to offset any net loss previously allocated to such member upon the sale or other disposition of a property;

·second, to each member in an amount that will cause the current allocation, together with all previous allocations of operating net income and net income resulting from the disposition of a real property, to be in proportion to and to the extent of the cumulative distributions received by such member for the current and all prior fiscal years; and

·thereafter, the remaining balance to the members pro rata in accordance with their Sharing Percentages.

In the event HCP DR California, LLC liquidates, the net income or net loss for that fiscal year is generally allocated as follows:

·first, to holders of non-managing member units pro rata in such amounts as will cause their capital account per unit to be, to the greatest extent possible, equal to the sum of: (a) the holder’s preferred return shortfall per unit (if any), (b) the value of a share of our stock (subject to specified adjustments), and (c) their pro rata share of a 1% (subject to adjustment) sharing amount; and

·thereafter, to us.

Each of the allocation provisions described above is subject to special allocations relating to depreciation deductions and to compliance with the provisions of Sections 704(b) and 704(c) of the Internal Revenue Code and related Treasury Regulations.

Term

The operating agreement provides that HCP DR California, LLC will continue until dissolved by us in accordance with the provisions of the operating agreement or as otherwise provided by law. HCP DR California, LLC also will dissolve if:

·we withdraw as the managing member, unless within 90 days the non-managing members holding a majority of the outstanding non-managing member units elect in writing to continue the business of HCP DR California, LLC and appoint  a substitute managing member;

·we elect to dissolve it in accordance with the provisions of the operating agreement;

·it sells substantially all of its assets and properties in accordance with the provisions of the operating agreement;

·it is dissolved by judicial order;

·a final non-appealable judgment or order is entered by a court of competent jurisdiction ruling that we are bankrupt or insolvent, unless within 90 days after the entry of such judgment or order the non-managing members holding a majority of the outstanding non-managing member units elect in writing to continue the business of HCP DR California, LLC and appoint a substitute managing member;

·we are incapacitated as the managing member, unless within 90 days the non-managing members holding a majority of the outstanding non-managing member units elect in writing to continue the business of HCP DR California, LLC and to the appointment of a substitute managing member; or

·all of the non-managing member units held by non-managing members have been redeemed.

Indemnification

The operating agreement provides that, to the fullest extent permitted by law, HCP DR California, LLC will indemnify us, our officers and directors, the non-managing members, the non-managing member representative and those other persons and entities that we may designate. We are not liable to HCP DR California, LLC or its members for losses sustained, liabilities incurred or benefits

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not derived as a result of good faith errors, mistakes of fact or law, or acts or omissions. See “Comparison of HCP DR California, LLC and HCP—Management Liability and Indemnification”.

Redemption Rights

The non-managing member units that were originally issued on July 22, 2005 became redeemable in whole or in part for cash on July 22, 2006.  Accordingly, beginning July 22, 2006, each non-managing member (exclusive of HCP) has the right to cause us to redeem all or a portion of the non-managing member units held by it and originally issued on the date set forth above for cash.  If a non-managing member makes such an election, in lieu of having HCP DR California, LLC redeem the tendered units we may, at our option, elect to acquire such units in exchange for shares of our common stock.

Upon redemption, the tendering holder will receive either (x) that number of shares of our common stock (the “Exchange Shares”) equal to the sum of (a) the number of non-managing member units tendered multiplied by an adjustment factor and (b) the number of non-managing member units tendered multiplied by the amount that (i) cash dividends, including interest, distributed to each share of our common stock since July 22, 2005 multiplied by the adjustment factor on the date of such distribution, exceeds (ii) prior distributions of HCP DR California, LLC with respect to such non-managing member units or (y) at our election, an amount of cash equal to the market value of the number of Exchange Shares as determined in (x). As of the date of this prospectus, the adjustment factor is 1.0; the adjustment factor will be adjusted to account for the economic effect of: (a) the payment of any dividends or other distributions on our common stock in shares of common stock, any split or subdivision in our outstanding common stock, and any reverse stock split or other combination of our outstanding common stock into a smaller number of shares; (b) the distribution of any rights, options or warrants to all holders of our common stock to subscribe for or purchase or otherwise acquire our common stock or securities convertible into or exchangeable for our common stock at a price lower than the market value of our common stock; and (c) the distribution, by dividend or otherwise, to all holders of our common stock evidences of indebtedness or assets related to assets not received by us pursuant to a pro rata distribution by HCP DR California, LLC. If we elect to deliver cash in exchange for all or any portion of the Exchange Shares, the market value of those shares will be deemed to be the average of the closing trading price of our common stock for the 20 trading days ending on the second trading day immediately prior to the day on which the tendering holder delivers a notice of redemption to us. Non-managing member units that are acquired by us pursuant to the exercise of non-managing member’s redemption rights will be held by us as non-managing member units, with the same rights and preferences of non-managing member units held by non-managing members of HCP DR California, LLC.

Our acquisition of the non-managing member units, whether they are acquired for shares of common stock or cash, will be treated as a sale of the non-managing member units to us for United States federal income tax purposes. See “United States Federal Income Tax Considerations—Tax Consequences of the Exercise of Redemption Rights.”

A tendering holder effecting a redemption of all or a portion of the non-managing member units held by him must deliver to us a notice of redemption as required by the operating agreement. In general, a tendering holder shall have the right to receive the Exchange Shares or cash, which is payable in connection with the redemption, on the twentieth day following our receipt of the notice of redemption. All Exchange Shares delivered will be issued as duly authorized, validly issued, fully paid and non-assessable shares, free of any pledge, lien, encumbrance or restriction, other than those provided in our charter, our bylaws, the Securities Act, relevant state securities or blue sky laws and any applicable registration rights or other agreement with respect to the Exchange Shares that the tendering holder has entered into. Notwithstanding any delay in delivery, the tendering holder shall be deemed the owner of such shares and vested with all rights of a stockholder as of the date on which the redemption occurs, including the right to vote or consent, and the right to receive dividends. Correspondingly, the tendering holder’s right to receive distributions with respect to the tendered non-managing member units will cease as of the date on which the redemption occurs.

The operating agreement imposes the following additional restrictions on the redemption of the non-managing member units:

·no non-managing member, assignee of a non-managing member or any substituted member of a non-managing member shall have the right to redeem units of HCP DR California, LLC to the extent that the exchange of such units for Exchange Shares would cause any person to own in excess of 9.8% of the number or value (whichever is more restrictive), as determined by our board in good faith, of outstanding shares of our common stock;

·no non-managing members, assignees of non-managing members or any substituted member of a non-managing member may exercise its redemption rights more than once in a calendar quarter, unless such non-managing member receives a notice of liquidation;

·no non-managing member may exercise its redemption right for fewer than 3,000 non-managing member units, unless the units constitute all of the units held by such non-managing member;

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·no non-managing member exercising its redemption right may deliver its notice of redemption during the period from December 1st of any year through January 1st of the following year; and

·no date of redemption, as specified by a non-managing member in its notice of redemption, shall occur during the period from December 21st of any year through January 22nd of the following year.

We will not be obligated to effect a redemption of tendered non-managing member units if the issuance of Exchange Shares to the tendering holder would be prohibited under the provisions of our charter, particularly those which are intended to protect our qualification as a REIT. We will not be obligated to effect a redemption of tendered non-managing member units until the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

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COMPARISON OF HCP DR CALIFORNIA, LLC AND HCP

Generally, the nature of an investment in our common stock is similar in several respects to an investment in non-managing member units of HCP DR California, LLC. However, there are also differences between ownership of non-managing member units and ownership of common stock, some of which may be material to investors.

HCP DR California, LLC and HCP are organized and incorporated in Delaware and Maryland, respectively. Upon the exchange of non-managing member units for our common stock, the rights of stockholders of HCP will be governed by the Maryland General Corporation Law and by our charter and bylaws.

The information below highlights the material differences between HCP DR California, LLC and us, relating to, among other things, form of organization, management control, voting rights, compensation and fees, investor rights, liquidity and federal income tax considerations. These comparisons are intended to assist holders of non-managing member units in understanding the ways in which their investment will be materially changed if they tender their non-managing member units for redemption and such units are exchanged for shares of our common stock.

The following discussion is summary in nature and does not constitute a complete discussion of these matters. The differences between the rights of HCP DR California, LLC unitholders and HCP stockholders may be determined in full by reference to the Maryland General Corporation Law, the Delaware Limited Liability Company Act, our charter and bylaws, the operating agreement of HCP DR California, LLC, as amended, and the balance of this prospectus and the registration statement of which this prospectus is a part.

HCP DR California, LLC / Delaware Law	HCP / Maryland Law
Form of Organization and Assets Owned
HCP DR California, LLC is a Delaware limited liability company. HCP DR California, LLC currently owns 12 senior housing facilities located in California, Washington and Nevada. All of HCP DR California, LLC’s assets were contributed to it by HCP and individuals and companies affiliated with Aegis Assisted Living, LLC or Oakmont Senior Living, LLC.	We are a Maryland corporation. We have elected to be taxed as a REIT under the Internal Revenue Code, commencing with our taxable year ended December 31, 1985, and intend to maintain our qualification as a REIT. Our qualification and taxation as a REIT depends upon our ability to meet the various qualification tests imposed under the Internal Revenue Code relating to our actual annual operating results, asset composition, distribution levels, and diversity of stock ownership. See “United States Federal Income Tax Considerations.” We are headquartered in Long Beach, California, with operations in Nashville, Tennessee, and our portfolio includes interests in 534 properties in 42 states. We invest primarily in real estate serving the healthcare industry in the United States. We acquire healthcare facilities and lease them to healthcare providers and provide mortgage financing secured by healthcare facilities. Our portfolio includes: (i) senior housing, including independent living facilities (“ILFs”), assisted living facilities (“ALFs”), and continuing care retirement communities (“CCRCs”); (ii) medical office buildings (“MOBs”); (iii) hospitals; (iv) skilled nursing facilities (“SNFs”); and (v) other healthcare facilities, including laboratory and office buildings.
Purpose
HCP DR California, LLC’s purpose is to acquire, own, manage, operate, repair, renovate, maintain, improve, expand, redevelop, encumber, sell, lease, hold for appreciation or otherwise dispose of the real properties contributed to it, and any other properties acquired by it, and to invest and ultimately distribute funds, including, without limitation, obtained from owning, operating or disposing of such properties.	Under our charter, we may engage in the ownership of real property and any other lawful act or activity for which corporations may be organized under Maryland law.

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HCP DR California, LLC / Delaware Law	HCP / Maryland Law
Additional Equity
See “Operating Agreement–Capital Contributions.”	The board of directors may, in its discretion, authorize the issuance of additional shares of common stock or preferred stock. However, the total number of shares issued cannot exceed the authorized number of shares of stock set forth in our charter.
Borrowing Policies
The operating agreement provides that HCP DR California, LLC is permitted to incur or assume debt, including debt to us or our affiliates. All debt will be nonrecourse to us, as managing member, unless we otherwise agree. Except as otherwise required for us, as managing member, to avoid the obligation of making a make whole payment under the operating agreement, as of the date of the incurrence of debt, the ratio of outstanding principal balance of all debt of HCP DR California, LLC to the fair market value of the contributed properties and successor properties shall not exceed sixty-five percent (65%).	We are not restricted under our charter or bylaws from incurring debt.
The operating agreement provides that until the earlier of (i) July 22, 2015 or (ii) the date on which the initial non-managing members have disposed of, in taxable transactions, 80% of the non-managing member units issued to them, HCP DR California, LLC will be required to pay to each non-managing member a make whole payment in an amount equal to the aggregate federal, state and local income taxes incurred by the non-managing member as a result of the event, if HCP DR California, LLC does any of the following without the consent of the holders of a majority of the non-managing member units held by non-managing members (excluding any non-managing member units held by the managing member):
·replaces or refinances such specified indebtedness, unless such indebtedness is refinanced or replaced with indebtedness that meets certain criteria;
·prepays such specified indebtedness; or
·fails to provide non-managing members the opportunity to guaranty indebtedness. See “Operating Agreement—Management.”
Management Control
All management powers over the business and affairs of HCP DR California, LLC are vested in us as the managing member. No non-managing member has any right to participate in or exercise control or management power over the business and affairs of HCP DR California, LLC, except for actions which require the consent of the holders of a majority of the non-managing member units held by non-managing members. See “Operating Agreement—Management” and “—Voting Rights.”	Our board of directors has exclusive control over our business affairs subject only to the applicable provisions of Maryland law and the provisions in our charter and bylaws.

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HCP DR California, LLC / Delaware Law	HCP / Maryland Law
Duties of Managing Members and Directors
Under Delaware law, we, as managing member of HCP DR California, LLC, are accountable to HCP DR California, LLC as a fiduciary and, consequently, are required to exercise good faith and integrity in all of our dealings with respect to HCP DR California, LLC’s affairs.	Under Maryland law, directors must perform their duties in good faith, in a manner that they reasonably believe to be in our best interests and with the care of an ordinarily prudent person in a like position under similar circumstances. Directors who act in such a manner generally will not be liable by reason of being a director. Under Maryland law, an act of a director is presumed to satisfy such standards.
Management Liability and Indemnification
HCP DR California, LLC has agreed to indemnify us, our directors and officers, the non-managing members and non-managing member representative and any other persons we designate from and against all claims and expenses, judgments, and other amounts incurred in connection with any actions relating to the operation of HCP DR California, LLC in which these indemnitees are involved, unless: ·the act taken by an indemnitee was in bad faith or was the result of active and deliberate dishonesty and was material to the action; ·an indemnitee received an improper personal benefit; or ·in the case of any criminal proceeding, an indemnity had reasonable cause to believe the act was unlawful.	Our charter contains a provision which eliminates the liability of directors and officers to us and our stockholders for money damages to the fullest extent permitted by Maryland law. Neither the provisions of our charter nor Maryland law limit the ability of us or our stockholders to obtain other relief, such as injunction or rescission. Our bylaws provide for indemnification of directors and officers to the fullest extent permitted by Maryland law. See “Provisions of Maryland Law and HCP’s Charter and Bylaws”.
HCP DR California, LLC is obligated to reimburse the reasonable expenses incurred by an indemnitee in advance of the final disposition of the proceeding if such indemnitee provides HCP DR California, LLC with an affirmation of its good faith belief that the standard of conduct necessary for indemnification has been met and an undertaking to repay the amount of the reimbursed expenses if it is determined that such standard was not met. No member of HCP DR California, LLC, including HCP, is obligated to make capital contributions to enable HCP DR California, LLC to fund these indemnification obligations.
The operating agreement generally provides that neither we, nor any of our directors or officers will incur liability to HCP DR California, LLC or any non-managing member for losses sustained or liabilities incurred as a result of errors in judgment or mistakes of fact or law or of any act or omission if we acted in good faith. In addition, we are not responsible for any misconduct or negligence on the part of our officers, directors or other agents, provided we have appointed such agents in good faith. We may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisors, and any action we take or omit to take in reliance upon their opinion, as to matters which we reasonably believe to be within their professional or expert competence, will be conclusively presumed to have been done or omitted in good faith and in accordance with their opinion.

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HCP DR California, LLC / Delaware Law	HCP / Maryland Law
Anti-Takeover Provisions
Except in limited circumstances (see “—Voting Rights” below), we have exclusive management power over the business and affairs of HCP DR California, LLC. Accordingly, we may hinder the ability of HCP DR California, LLC to engage in a merger transaction or other business combination. We may not be removed as managing member by the other members with or without cause. Until July 22, 2015 or until the initial non-managing members have disposed of, in taxable transactions, 80% of the non-managing member units issued to them, HCP DR California, LLC will be required to pay a make whole payment to each non-managing member if we cause HCP DR California, LLC to merge with another entity, sell all or substantially all of its assets or reclassify its outstanding equity interests without the consent of the holders of a majority of the non-managing member units held by non-managing members. These limitations may have the effect of hindering the ability of HCP DR California, LLC to enter into business combinations. A non-managing member generally may not transfer all or any portion of its membership interest in HCP DR California, LLC without first offering that membership interest to us or otherwise obtaining our consent. Accordingly, we may elect to exercise our right of first refusal to prevent a membership interest from being transferred to a particular third party. Furthermore, upon the transfer by a non-managing member of its membership interest in HCP DR California, LLC, the transferee may become a member of HCP DR California, LLC only upon our approval, which we may give or withhold in our sole and absolute discretion. Until admitted to HCP DR California, LLC as a member, a transferee of a membership interest is not entitled to vote on any matter submitted to the members for their approval. The ability of a non-managing member to transfer its membership interest in HCP DR California, LLC may be further limited by other factors. See “Operating Agreement—Transferability of Interests.”	Our charter and bylaws contain a number of provisions that may delay or discourage an unsolicited proposal for the acquisition of our company or the removal of incumbent management. These provisions include: ·authorized capital stock that may be issued as preferred stock in the discretion of the board of directors, with voting or other rights superior to the common stock; ·provisions designed to avoid concentration of share ownership in a manner that would jeopardize our status as a REIT under the Internal Revenue Code; ·super-majority stockholder vote for certain business combinations; and ·the advance notice provisions of our bylaws. Maryland law also contains provisions which could delay, defer or prevent a change of control or other transaction. See “Provisions of Maryland Law and HCP’s Charter and Bylaws.”
Voting Rights
Under the operating agreement, the non-managing members have voting rights only as to specified matters including: ·amending the operating agreement, except in limited circumstances; and ·those other actions discussed above under “Operating Agreement—Management.” The non-managing members generally do not otherwise have the right to vote on decisions relating to the operation or management of HCP DR California, LLC.	Common stockholders elect each director on the Board of Directors at each annual meeting of the stockholders to hold office until the next annual meeting of stockholders and until his or her successor is elected and qualifies. Maryland law requires that major corporate transactions, including most amendments to our charter, must have stockholder approval as described below. All shares of common stock have one vote per share. Our charter permits the board of directors to classify and issue preferred stock in one or more series having voting power which may differ from that of the common stock. See “Description of HCP Capital Stock.”

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HCP DR California, LLC / Delaware Law	HCP / Maryland Law
The following is a comparison of the voting rights of the non-managing members of HCP DR California, LLC and of our stockholders as they relate to major transactions:
A. Amendment of the Organizational Documents
Amendments to the operating agreement may be proposed by us as managing member of HCP DR California, LLC or by holders of a majority of the non-managing member units held by non-managing members. Such proposal, in order to be effective, must be approved by us and the holders of a majority of the non-managing member units held by non-managing members. In addition, amendments that would, among other things:	Under our charter, most amendments to our charter must be approved by the board of directors and by the affirmative vote of at least a majority of the votes entitled to be cast by our stockholders on the matter. The affirmative vote of holders of at least two-thirds of our voting stock is required to repeal or amend the provisions of the charter relating to:
·convert a non-managing member’s interest in HCP DR California, LLC into a managing member interest; ·modify the limited liability of a non-managing member; ·alter the rights of a member to receive distributions or the allocation of income and loss to a member; ·materially alter the right of a member to redeem its non-managing member units or the right of a member to receive a make-whole payment as set forth in the operating agreement; or ·alter or modify the section governing the transfer of the managing member’s membership interest,	·business combinations; ·the removal and setting of the minimum and maximum number of our directors; and ·certain limitations on ownership of our voting capital stock. See “Description of HCP Capital Stock.”
must be approved by each non-managing member that would be adversely affected by any such amendment. We may amend the operating agreement without the consent of the non-managing members if the purpose or the effect of such amendment is to make administrative or inconsequential changes, comply with any federal or state agency rulings, guidelines directives or laws, or as are necessary for us to maintain our status as a REIT.
B. Vote Required to Dissolve; Vote Required to Sell Assets or Merge
Dissolution. The consent of HCP and the holders of a majority of the non-managing members is generally required to dissolve HCP DR California, LLC. See “—Voting Rights.” Sale of Assets. Until the earlier of (i) the July 22, 2015 or (ii) the date on which the initial non-managing members have disposed of, in taxable transactions, 80% of the non-managing member units issued to them, HCP DR California, LLC will be required to pay to the non-managing members a make whole payment unless we first obtain the consent of the holders of a majority of the non-managing member units held by non-managing members before we sell, dispose of, convey or otherwise transfer HCP DR California, LLC’s properties.	Our dissolution must be approved by our board of directors by a majority vote of the entire board and by our stockholders by the affirmative vote of a majority of all the votes entitled to be cast by our stockholders on the matter. Our charter requires that “Business Combinations” between us and a beneficial holder of 10% or more of our outstanding voting stock be approved by the affirmative vote of at least 90% of our outstanding voting shares, unless unanimously approved in advance by our board or the “Business Combination” is between us and a wholly-owned subsidiary. See the disclosure under “Description of HCP Capital Stock - Business Combination Provisions” in this prospectus. Generally, mergers, consolidations and sales of all or substantially all of our assets must be approved by the affirmative vote of a majority of all votes entitled to be cast on the matter. No approval of our stockholders is required for any sale of less than all or substantially all of our assets which is not a business combination.

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HCP DR California, LLC / Delaware Law	HCP / Maryland Law
Merger. See “—Anti-Takeover Provisions.”
Compensation, Fees and Distributions
We do not receive any compensation for our services as managing member of HCP DR California, LLC. HCP DR California, LLC will, however, reimburse HCP for all expenses incurred relating to the ongoing operation of HCP DR California, LLC and any other offering of additional interests in HCP DR California, LLC.	Our officers and outside directors receive compensation for their services as more fully described in the compensation information incorporated by reference in our annual report on Form 10-K, which is incorporated by reference into this prospectus.
Liability of Investors
Under the operating agreement and applicable Delaware law, the liability of the non-managing members for the debts and obligations of HCP DR California, LLC is generally limited to the amount of their investment in HCP DR California, LLC, together with their interest in any undistributed income, if any.	Under Maryland law, our stockholders are not personally liable for our debts or obligations solely as a result of their status as stockholders.
Liquidity
Except in limited circumstances, see “Operating Agreement—Transferability of Interests,” a non-managing member may not transfer all or any portion of its membership interest in HCP DR California, LLC without first offering that membership interest to us or otherwise obtaining our consent. HCP has the right to receive an opinion of counsel in connection with the transfer of a membership interest by a non-managing member to the effect that the transfer may be effected without registration under the Securities Act and will not otherwise violate any applicable federal or state securities law. A transferee of a non-managing member’s interest in HCP DR California, LLC may not become a member of HCP DR California, LLC without our consent.	Shares of common stock issued pursuant to this prospectus will be freely transferable, subject to prospectus delivery and other requirements of the Securities Act, and the transfer restrictions in our charter. Our common stock is listed on the New York Stock Exchange. The breadth and strength of this secondary market will depend, among other things, upon the number of shares outstanding, our financial results and prospects, the general interest in our and other real estate investments, and our dividend yield compared to that of other debt and equity securities.
Taxes
HCP DR California, LLC itself is not subject to federal income taxes. Instead, each holder of units includes its allocable share of HCP DR California, LLC’s taxable income or loss in determining its individual federal income tax liability. Cash distributions from HCP DR California, LLC generally are not taxable to a holder of non-managing member units except to the extent they exceed such holder’s basis in its interest in HCP DR California, LLC (which will include such holder’s allocable share of HCP DR California, LLC’s debt).	As long as we qualify as a REIT, distributions out of our current or accumulated earnings and profits, other than capital gain dividends discussed below, generally will constitute dividends taxable to our taxable U.S. stockholders as ordinary income and will not be eligible for the dividends-received deduction in the case of U.S. stockholders that are corporations. In addition, these distributions generally will not be eligible for treatment as “qualified dividend income” for individual U.S. stockholders. Distributions that we properly designate as capital gain dividends will be taxable to our taxable U.S. stockholders as gain from the sale or disposition of a capital asset, to the extent

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HCP DR California, LLC / Delaware Law	HCP / Maryland Law
Income and loss from HCP DR California, LLC generally are subject to the “passive activity” limitations. Under the “passive activity” limitations, income and loss from HCP DR California, LLC that is considered “passive income” generally can be offset against income and loss from other investments that constitute “passive activities.”	that such gain does not exceed our actual net capital gain for the taxable year. Distributions in excess of current and accumulated earnings and profits will be treated as a nontaxable return of capital to the extent of a stockholder’s adjusted basis in his, her or its common stock, with the excess taxed as capital gain.
Holders of non-managing member units are required, in some cases, to file state income tax returns and/or pay state income taxes in the states in which HCP DR California, LLC owns property, even if they are not residents of those states.	Distributions we make and gain arising from the sale or exchange by a U.S. stockholder of our shares will not be treated as passive activity income. As a result, U.S. stockholders generally will not be able to apply any “passive losses” against this income or gain.
	Stockholders who are individuals generally will not be required to file state income tax returns and/or pay state income taxes outside of their state of residence with respect to our operations and distributions. We may be required to pay state income taxes in various states.

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PROVISIONS OF MARYLAND LAW AND
HCP’S CHARTER AND BYLAWS

The following paragraphs summarize provisions of Maryland law and describe our charter and bylaws. This is a summary, and does not completely describe Maryland law, our charter or our bylaws. For a complete description, we refer you to the Maryland General Corporation Law, our charter and our bylaws. We have incorporated by reference our charter and bylaws as exhibits to the registration statement of which this prospectus is a part.

Election of Directors

Under our bylaws, we have ten directors unless increased or decreased by the board of directors or our stockholders. However, this number may not be fewer than three. At each annual meeting of stockholders, the election of directors shall be by a plurality of the votes cast.  Holders of common stock have no right to cumulative voting for the election of directors. Consequently, at each annual meeting of stockholders, the holders of a majority of the outstanding shares of our common stock can elect all of our directors. A vacancy resulting from an increase in the number of directors may be filled by a majority vote of the entire board of directors or by the affirmative vote of the holders of a majority of our shares then entitled to vote at an election of directors. Other vacancies may be filled by the vote of a majority of the remaining directors.

Removal of Directors

Under the terms of our charter and Maryland law, a director of ours may be removed by the affirmative vote of the holders of two-thirds of the outstanding shares of our voting stock or by a unanimous vote of all other directors. Our stockholders may elect a successor to fill any vacancy which results from the removal of a director.

Business Combinations

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:

·any person who beneficially owns ten percent or more of the voting power of the corporation’s shares; or

·an affiliate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of ten percent or more of the voting power of the then outstanding voting stock of the corporation.

After the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:

·80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and

·two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or which are held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. None of these provisions of the Maryland law will apply, however, to business combinations that are approved or exempted by the board of directors of the corporation prior to the time that the interested stockholder becomes an interested stockholder.

In addition to the restrictions on business combinations provided under Maryland law, our charter also contains restrictions on business combinations. See “Description of Capital Stock - Business Combination Provisions.”

Control Share Acquisitions

Maryland law provides that “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares of stock owned by the acquiror, by officers or by directors who are employees of the corporation are excluded from shares entitled to vote on the matter. “Control shares” are voting shares of stock which, if aggregated with all other shares of stock owned by the acquiror or shares of stock

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for which the acquiror is able to exercise or direct the exercise of voting power except solely by virtue of a revocable proxy, would entitle the acquiror to exercise voting power in electing directors within one of the following ranges of voting power:

·one-tenth or more but less than one-third;

·one-third or more but less than a majority; or

·a majority or more of all voting power.

Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. Except as otherwise specified in the statute, a “control share acquisition” means the acquisition of control shares.

Once a person who has made or proposes to make a control share acquisition has undertaken to pay expenses and satisfied other conditions, the person may compel the board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the corporation may be able to redeem any or all of the control shares for fair value, except for control shares for which voting rights previously have been approved. The right of the corporation to redeem control shares is subject to certain conditions and limitations. Fair value is determined without regard to the absence of voting rights for control shares, as of the date of the last control share acquisition by the acquiror or of any meeting of stockholders at which the voting rights of control shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of these appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition. Some of the limitations and restrictions otherwise applicable to the exercise of dissenters’ rights do not apply in the context of a control share acquisition.

The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or to acquisitions approved or exempted by the charter or bylaws of the corporation. Our charter and bylaws do not provide for any such exemption.

Duties of Directors with Respect to Unsolicited Takeovers

Maryland law provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the directors in unsolicited takeover situations.  The duties of directors of Maryland corporations do not require them to (a) accept, recommend or respond to any proposal by a person seeking to acquire control of the corporation, (b) make a determination under the Maryland business combination or control share acquisition statutes described above, or (c) act or fail to act solely because of the effect the act or failure to act may have on an acquisition or potential acquisition of control of the corporation or the amount or type of consideration that may be offered or paid to the stockholders in an acquisition.  Moreover, under Maryland law the act of a director of a Maryland corporation relating to or affecting an acquisition or potential acquisition of control is not subject to any higher duty or greater scrutiny than is applied to any other act of a director.  Maryland law also contains a statutory presumption that an act of a director of a Maryland corporation satisfies the applicable standards of conduct for directors under Maryland law.

Unsolicited Takeovers

Under Maryland law, a Maryland corporation with a class of equity securities registered under the Securities Exchange Act of 1934, as amended, and at least three independent directors may elect to be subject to certain statutory provisions relating to unsolicited takeovers which, among other things, would automatically classify the board of directors into three classes with staggered terms of three years each and vest in the board of directors the exclusive right to determine the number of directors and the exclusive right, by the affirmative vote of a majority of the remaining directors, to fill vacancies on the board of directors, even if the remaining directors do not constitute a quorum. These statutory provisions relating to unsolicited takeovers also provide that any director elected to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, rather than the next annual meeting of directors as would otherwise be the case, and until his successor is elected and qualified.

An election to be subject to any or all of the foregoing statutory provisions may be made in our charter or bylaws, or by resolution of our board of directors, without stockholder approval. Any such statutory provision to which we elect to be subject will apply even if other provisions of Maryland law or our charter or bylaws provide to the contrary. Neither our charter nor our bylaws provides that we are subject to any of the foregoing statutory provisions relating to unsolicited takeovers. However, our board of

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directors could adopt a resolution, without stockholder approval, to elect to become subject to some or all of these statutory provisions.

If we made an election to be subject to such statutory provisions and our board of directors were divided into three classes with staggered terms of office of three years each, the classification and staggered terms of office of our directors would make it more difficult for a third party to gain control of our board of directors since at least two annual meetings of stockholders, instead of one, generally would be required to effect a change in the majority of our board of directors.

Amendments to the Charter

Provisions of our charter on business combinations, the number of directors and certain ownership restrictions may be amended only if approved by our board of directors and by our stockholders by the affirmative vote of two-thirds of all of the votes entitled to be cast by our stockholders on the matter. Other amendments to our charter require approval by our board of directors and approval by our stockholders by the affirmative vote of a majority of all the votes entitled to be cast by our stockholders on the matter.

Amendment to the Bylaws

Provisions of our bylaws on the number of directors and the vote required to amend the bylaws may be amended only by unanimous vote of the board of directors or by the affirmative vote of not less than 90% of all of the votes entitled to be cast by our stockholders on the matter. Other amendments to our bylaws require the affirmative vote of a majority of the entire board of directors or the affirmative vote of two-thirds of all of the votes entitled to be cast by our stockholders on the matter.

Dissolution of Health Care Property Investors, Inc.

Our dissolution must be approved by our board of directors by a majority vote of the entire board and by our stockholders by the affirmative vote of a majority of all the votes entitled to be cast by our stockholders on the matter.

Advance Notice of Director Nominations and New Business; Procedures of Special Meetings Requested by Stockholders

Our bylaws provide that nominations of persons for election to the board of directors and the proposal of business to be considered by stockholders at the annual or special meeting of stockholders may be made only:

·pursuant to our notice of the meeting;

·by or at the direction of the board of directors; or

·by a stockholder who was a stockholder at the time the notice of meeting was given and is entitled to vote at the meeting and who has complied with the advance notice procedures, including the minimum time period, described in the bylaws.

Our bylaws also provide that only the business specified in our notice of meeting may be brought before a special meeting of stockholders.  Our bylaws provide that our stockholders have the right to call a special meeting only upon the written request of the stockholders holding in the aggregate not less than 50% of the outstanding shares entitled to vote on the business proposed to be transacted at such meeting.

Anti-Takeover Effect of Provisions of Maryland Law and of the Charter and Bylaws

The provisions in the charter on removal of directors and business combinations, the business combinations and control share acquisition provisions of Maryland law, the advance notice provisions of our bylaws and the provisions of our bylaws relating to stockholder-requested special meetings may delay, defer or prevent a change of control or other transaction in which holders of some, or a majority, of the common stock might receive a premium for their common stock over the then prevailing market price or which such holders might believe to be otherwise in their best interests.

Limitation of Liability and Indemnification

Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages. However, a Maryland corporation may not limit liability resulting from actual receipt of an improper benefit or profit in money, property or services. Also, liability resulting from active and deliberate dishonesty may not be eliminated if a final judgment establishes that the dishonesty is material to the cause of action. Our charter contains a provision which limits the liability of directors and officers for money damages to the maximum extent permitted by Maryland law. This provision does not limit our right or that of our stockholders to obtain equitable relief, such as an injunction or rescission.

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Our bylaws obligate us, to the maximum extent permitted by Maryland law, to indemnify and, without requiring a preliminary determination as to the ultimate entitlement to indemnification, to pay or reimburse reasonable expenses before final disposition of a proceeding to:

·any present or former director or officer who is made a party to the proceeding by reason of his service in that capacity; or

·any individual who, while one of our directors or officers and at our request, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise and who is made a party to the proceeding by reason of his service in that capacity.

The bylaws authorize us, with the approval of our board of directors, to provide indemnification and advancement of expenses to our agents and employees.

Unless limited by a corporation’s charter, Maryland law requires a corporation to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he is made a party by reason of his service in that capacity, or in the defense of any claim, issue or matter in the proceeding. Our charter does not alter this requirement.

Maryland law permits a corporation to indemnify its present and former directors and officers, among others, against:

·judgments;

·penalties;

·fines;

·settlements; and

·reasonable expenses actually incurred by them in connection with any proceeding to which they may be made a party by reason of their service in those or other capacities.

Maryland law does not permit a corporation to indemnify its present and former directors and officers if it is established that:

·the act or omission of the director or officer was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty;

·the director or officer actually received an improper personal benefit in money, property or services; or

·in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

Under Maryland law, a Maryland corporation generally may not indemnify for an adverse judgment in a suit by or in the right of the corporation. Also, a Maryland corporation generally may not indemnify for a judgment of liability on the basis that personal benefit was improperly received. In either of these cases, a Maryland corporation may indemnify for expenses only if a court so orders.

Maryland law permits a corporation to advance reasonable expenses to a director or officer. First, however, the corporation must receive a written affirmation by the director or officer of his good faith belief that he has met the standard of conduct necessary for indemnification by the corporation. The corporation must also receive a written undertaking, either by the director or officer or on his behalf, to repay the amount paid or reimbursed by the corporation if it shall ultimately be determined that the standard of conduct was not met. The termination of any proceeding by conviction, or upon a plea of nolo contendere or its equivalent, or an entry of any order of probation prior to judgment, creates a rebuttable presumption that the director or officer did not meet the requisite standard of conduct required for indemnification to be permitted.

The operating agreement also provides for indemnification of us, as managing member, and our officers and directors generally to the same extent as permitted by Maryland law for a corporation’s officers and directors. The operating agreement also limits our liability to HCP DR California, LLC and its members in the case of losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or any act or omission made in good faith.

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It is the position of the Commission that indemnification of directors and officers for liabilities arising under the Securities Act is against public policy and is unenforceable pursuant to Section 14 of the Securities Act.

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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a general summary of the material United States federal income tax considerations regarding our election to be taxed as a REIT and the ownership and disposition of our common stock.  This summary is based on current law, is for general information only and is not tax advice.  The anticipated income tax treatment described in this prospectus may be changed, perhaps retroactively, by legislative, administrative or judicial action at any time.

This summary assumes that shares of our common stock and membership units in HCP DR California, LLC are held as “capital assets” (generally, property held for investment within the meaning of Section 1221 of the Internal Revenue Code).  Your tax treatment will vary depending on your particular situation, and this discussion does not purport to deal with all aspects of taxation that may be relevant to a holder of our common stock in light of his or her personal investment or tax circumstances, or to holders who receive special treatment under the federal income tax laws except to the extent discussed under the headings “—Taxation of Tax-Exempt Stockholders” and “—Taxation of Non-U.S. Stockholders.” Holders of common stock receiving special treatment include, without limitation:

·banks, insurance companies or other financial institutions;

·broker-dealers;

·“S” corporations;

·traders;

·expatriates;

·pension plans and other tax-exempt organizations;

·persons who are subject to alternative minimum tax;

·persons who hold their shares of our common stock or membership units in HCP DR California, LLC as a position in a “straddle” or as part of a “hedging”, “conversion” or other risk reduction transaction;

·regulated investment companies and real estate investment trusts;

·persons deemed to sell their shares of our common stock or membership units in HCP DR California, LLC under the constructive sale provisions of the Internal Revenue Code;

·United States persons that have a functional currency other than the United States dollar;

·except to the extent specifically discussed below, non-U.S. stockholders (as defined below);

·persons who are subject to the alternative minimum tax provisions of the Internal Revenue Code; or

·partnerships or other entities treated as partnerships for United States federal income tax purposes and partners in such partnerships.

In addition, this summary does not purport to deal with aspects of taxation that may be relevant to a non-managing member of HCP DR California, LLC (except to the extent discussed in “—Tax Consequences of the Exercise of Redemption Rights”). This discussion does not address any state, local or foreign tax consequences of ownership of our common stock or our election to be taxed as a REIT.

The information in this section is based on:

·the Internal Revenue Code;

·current, temporary and proposed Treasury Regulations promulgated under the Internal Revenue Code;

·the legislative history of the Internal Revenue Code;

·current administrative interpretations and practices of the Internal Revenue Service; and

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·court decisions;

in each case, as of the date of this prospectus. In addition, the administrative interpretations and practices of the Internal Revenue Service include its practices and policies as expressed in private letter rulings that are not binding on the Internal Revenue Service except with respect to the particular taxpayers who requested and received those rulings. Future legislation, Treasury Regulations, administrative interpretations and practices and/or court decisions may adversely affect the tax considerations described in this prospectus. Any such change could apply retroactively to transactions preceding the date of the change. We have not requested and do not intend to request a ruling from the Internal Revenue Service that we qualify as a REIT, and the statements in this prospectus are not binding on the Internal Revenue Service or any court. Thus, we can provide no assurance that the tax considerations contained in this summary will not be challenged by the Internal Revenue Service or will be sustained by a court if so challenged.

You are urged to consult your tax advisor regarding the specific tax consequences to you of:

·the redemption of your HCP DR California, LLC units for cash or the exchange of such units for our common stock;

·the acquisition, ownership and sale or other disposition of our common stock, including the federal, state, local, foreign and other tax consequences;

·our election to be taxed as a REIT for federal income tax purposes; and

·potential changes in applicable tax laws.

Tax Consequences of the Exercise of Redemption Rights

If you exercise your right to require HCP DR California, LLC to redeem all or part of your HCP DR California, LLC units, and we elect to acquire some or all of your units in exchange for our common stock, the exchange will be a taxable transaction. You generally will recognize gain in an amount equal to the value of our common stock received, plus the amount of liabilities of HCP DR California, LLC allocable to your units being acquired, less your tax basis in those units. The recognition of any loss is subject to a number of limitations set forth in the Internal Revenue Code.  The character of any gain or loss as capital or ordinary will depend on the nature of the assets of HCP DR California, LLC at the time of the exchange. The tax treatment of any redemption of your units by HCP DR California, LLC for cash may be similar, depending on your circumstances.

Taxation of the Company

General.   We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code, commencing with our taxable year ending December 31, 1985.  We believe we have been organized and have operated in a manner which allows us to qualify for taxation as a REIT under the Internal Revenue Code commencing with our taxable year ending December 31, 1985. We currently intend to continue to be organized and operate in this manner. However, qualification and taxation as a REIT depend upon our ability to meet the various qualification tests imposed under the Internal Revenue Code, including through actual annual operating results, asset composition, distribution levels and diversity of stock ownership. Accordingly, no assurance can be given that we have been organized and have operated or will continue to be organized and operate in a manner so as to qualify or remain qualified as a REIT. See “—Failure to Qualify.”

The sections of the Internal Revenue Code and the corresponding Treasury Regulations that relate to the qualification and taxation of a REIT are highly technical and complex. The following sets forth a summary of the material aspects of the sections of the Internal Revenue Code that govern the federal income tax treatment of a REIT and its stockholders. This summary is qualified in its entirety by the applicable Internal Revenue Code provisions, Treasury Regulations, and related administrative and judicial interpretations thereof.

Latham & Watkins LLP has acted as our tax counsel in connection with this registration of our common stock and our election to be taxed as a REIT. Latham & Watkins LLP has rendered an opinion to us to the effect that, commencing with our taxable year ended December 31, 1985, we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT, and that our proposed method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the Internal Revenue Code.  It must be emphasized that this opinion was based on various assumptions and representations as to factual matters, including representations made by us in a factual certificate provided by one of our officers.  In addition, this opinion was based upon our factual representations set forth in this prospectus.  Moreover, our qualification and taxation as a REIT depend upon our ability to meet the various qualification tests imposed under the Internal Revenue Code which are discussed below, including through actual annual operating results, asset composition, distribution levels and diversity of stock ownership, the results of which have not been and will not be reviewed by Latham & Watkins LLP.  Accordingly, no assurance can

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be given that our actual results of operation for any particular taxable year have satisfied or will satisfy those requirements.  See  “—Failure to Qualify.”  Further, the anticipated income tax treatment described in this prospectus may be changed, perhaps retroactively, by legislative, administrative or judicial action at any time.  Latham & Watkins LLP has no obligation to update its opinion subsequent to its date.

Provided we qualify for taxation as a REIT, we generally will not be required to pay federal corporate income taxes on our net income that is currently distributed to our stockholders.  This treatment substantially eliminates the “double taxation” that ordinarily results from investment in a C corporation.  A C corporation generally is required to pay tax at the corporate level.  Double taxation means taxation once at the corporate level when income is earned and once again at the stockholder level when the income is distributed.  We will be required to pay federal income tax, however, as follows:

We will be required to pay tax at regular corporate tax rates on any undistributed REIT taxable income, including undistributed net capital gains.

We may be required to pay the “alternative minimum tax” on our items of tax preference under certain circumstances.

If we have: (a) net income from the sale or other disposition of “foreclosure property” which is held primarily for sale to customers in the ordinary course of business; or (b) other nonqualifying income from foreclosure property, we will be required to pay tax at the highest corporate rate on this income.  Foreclosure property generally is defined as property we acquired through foreclosure or after a default on a loan secured by the property or a lease of the property and for which an election is in effect.

We will be required to pay a 100% tax on any net income from prohibited transactions.  Prohibited transactions are, in general, sales or other taxable dispositions of property, other than foreclosure property, held as inventory or primarily for sale to customers in the ordinary course of business.

If we fail to satisfy the 75% gross income test or the 95% gross income test discussed below, but have otherwise maintained our qualification as a REIT because certain other requirements are met, we will be required to pay a tax equal to (a) the greater of (i) the amount by which 75% of our gross income exceeds the amount qualifying under the 75% gross income test and (ii) the amount by which 95% of our gross income (90% for our taxable years ended on or prior to December 31, 2004) exceeds the amount qualifying under the 95% gross income test, multiplied by (b) a fraction intended to reflect our profitability.

If we fail to satisfy any of the REIT asset tests (other than a de minimis failure of the 5% or 10% asset tests), as described below, due to reasonable cause and not due to willful neglect, and we nonetheless maintain our REIT qualification because of specified cure provisions, we will be required to pay a tax equal to the greater of $50,000 or the highest corporate tax rate multiplied by the net income generated by the nonqualifying assets that caused us to fail such test.

If we fail to satisfy any provision of the Internal Revenue Code that would result in our failure to qualify as a REIT (other than a violation of the REIT gross income tests or certain violations of the asset tests described below) and the violation is due to reasonable cause and not due to willful neglect, we may retain our REIT qualification but will be required to pay a penalty of $50,000 for each such failure.

We will be required to pay a 4% excise tax to the extent we fail to distribute during each calendar year at least the sum of (a) 85% of our REIT ordinary income for the year, (b) 95% of our REIT capital gain net income for the year, and (c) any undistributed taxable income from prior periods.

If we acquire any asset from a corporation which is or has been a C corporation in a transaction in which the basis of the asset in our hands is determined by reference to the basis of the asset in the hands of the C corporation (as is expected to occur in connection with the Advisor merger), and we subsequently recognize gain on the disposition of the asset during the ten-year period beginning on the date on which we acquired the asset, then we will be required to pay tax at the highest regular corporate tax rate on this gain to the extent of the excess of (a) the fair market value of the asset over (b) our adjusted basis in the asset, in each case determined as of the date on which we acquired the asset.  The results described in this paragraph with respect to the recognition of gain assume that certain elections specified in applicable Treasury Regulations are either made or forgone by us or by the entity from which the assets are acquired, in each case, depending upon the date such acquisition occurred.

We will be required to pay a 100% tax on any “redetermined rents,” “redetermined deductions” or “excess interest.” In general, redetermined rents are rents from real property that are overstated as a result of services furnished to any of our tenants by a “taxable REIT subsidiary” of ours.  Redetermined deductions and excess interest generally represent amounts that are deducted by a taxable REIT subsidiary of ours for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations.

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Requirements for Qualification as a REIT.    The Internal Revenue Code defines a REIT as a corporation, trust or association:

(1)that is managed by one or more trustees or directors;

(2)that issues transferable shares or transferable certificates to evidence its beneficial ownership;

(3)that would be taxable as a domestic corporation but for Sections 856 through 860 of the Internal Revenue Code;

(4)that is not a financial institution or an insurance company within the meaning of the Internal Revenue Code;

(5)that is beneficially owned by 100 or more persons;

(6)not more than 50% in value of the outstanding stock of which is owned, actually or constructively, by five or fewer individuals, including specified entities, during the last half of each taxable year; and

(7)that meets other tests, described below, regarding the nature of its income and assets and the amount of its distributions.

The Internal Revenue Code provides that conditions (1) to (4), inclusive, must be met during the entire taxable year and that condition (5) must be met during at least 335 days of a taxable year of twelve months, or during a proportionate part of a taxable year of less than twelve months.  Conditions (5) and (6) do not apply until after the first taxable year for which an election is made to be taxed as a REIT.  For purposes of condition (6), specified tax-exempt entities generally are treated as individuals, except that a “look-through” exception applies with respect to certain pension funds.

We believe that we have been organized, have operated and have issued sufficient shares of capital stock with sufficient diversity of ownership to allow us to satisfy conditions (1) through (7) inclusive, during the relevant time periods.  In addition, our charter documents provide for restrictions regarding ownership and transfer of our shares which are intended to assist us in continuing to satisfy the ownership requirements described in conditions (5) and (6) above.  These stock ownership and transfer restrictions are described in “Description of HCP Capital Stock—Transfer and Ownership Restrictions Relating to Our Preferred Stock” and “Description of HCP Capital Stock—Transfer and Ownership Restrictions Relating to Our Common Stock.”  These restrictions, however, may not ensure that we will, in all cases, be able to satisfy the share ownership requirements described in conditions (5) and (6) above.  If we fail to satisfy these share ownership requirements, except as provided in the next two sentences, our status as a REIT will terminate.  See “—Failure to Qualify.”  If, however, we comply with the rules contained in applicable Treasury Regulations that require us to ascertain the actual ownership of our shares and we do not know, or would not have known through the exercise of reasonable diligence, that we failed to meet the requirement described in condition (6) above, we will be treated as having met this requirement.

In addition, we may not maintain our status as a REIT unless our taxable year is the calendar year.  We have and will continue to have a calendar taxable year.

Ownership of Interests in Partnerships and Limited Liability Companies.    We own and operate one or more properties through partnerships and limited liability companies.  Treasury Regulations provide that if we are a partner in a partnership, we will be deemed to own our proportionate share of the assets of the partnership based on our interest in partnership capital, subject to special rules relating to the 10% REIT asset test described below.  Also, we will be deemed to be entitled to our proportionate share of the income of the partnership.  The assets and gross income of the partnership retain the same character in our hands for purposes of Section 856 of the Internal Revenue Code, including satisfying the gross income tests and the asset tests.  In addition, for these purposes, the assets and items of income of any partnership in which we own a direct or indirect interest include such partnership’s share of assets and items of income of any partnership in which it owns an interest.  A brief summary of the rules governing the federal income taxation of partnerships and their partners is included below in “—Tax Aspects of the Partnerships.” The treatment described above also applies with respect to the ownership of interests in limited liability companies or other entities that are treated as partnerships for tax purposes.

We have direct or indirect control of certain partnerships and limited liability companies and intend to continue to operate them in a manner consistent with the requirements for our qualification as a REIT.  We are a limited partner or non-managing member in certain partnerships and limited liability companies.  If any such a partnership or limited liability company were to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity.  In addition, it is possible that a partnership or limited liability company could take an action which could cause us to fail a REIT income or asset test, and that we would not become aware of such action in a time frame which would allow us to dispose of our interest in the

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applicable entity or take other corrective action on a timely basis.  In that case, unless we were entitled to relief, as described below, we would fail to qualify as a REIT.

Ownership of Interests in Qualified REIT Subsidiaries.    We own and operate a number of properties through our wholly-owned subsidiaries that we believe will be treated as “qualified REIT subsidiaries” under the Internal Revenue Code.  A corporation will qualify as our qualified REIT subsidiary if we own 100% of its outstanding stock and if we do not elect with the subsidiary to treat it as a “taxable REIT subsidiary,” as described below.  A corporation that is a qualified REIT subsidiary is not treated as a separate corporation for federal income tax purposes, and all assets, liabilities and items of income, deduction and credit of a qualified REIT subsidiary are treated as assets, liabilities and items of income, deduction and credit (as the case may be) of the parent REIT for all purposes under the Internal Revenue Code (including all REIT qualification tests).  Thus, in applying the federal tax requirements described in this prospectus, the subsidiaries in which we own a 100% interest (other than any taxable REIT subsidiaries) are ignored, and all assets, liabilities and items of income, deduction and credit of such subsidiaries are treated as our assets, liabilities and items of income, deduction and credit.  A qualified REIT subsidiary is not required to pay federal income tax, and our ownership of the stock of a qualified REIT subsidiary does not violate the restrictions on ownership of securities of any one issuer which constitute more than 10% of the voting power or value of such issuer’s securities or more than 5% of the value of our total assets, as described below in “—Asset Tests.”

Ownership of Interests in Taxable REIT Subsidiaries.  In general, a taxable REIT subsidiary is a corporation other than a REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with the REIT to be treated as a taxable REIT subsidiary.  A taxable REIT subsidiary also includes any corporation other than a REIT with respect to which a taxable REIT subsidiary owns securities possessing more than 35% of the total voting power or value of the outstanding securities of such corporation.  A taxable REIT subsidiary generally may engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT, except that a taxable REIT subsidiary may not directly or indirectly operate or manage a lodging or healthcare facility or directly or indirectly provide to any other person (under a franchise, license or otherwise) rights to any brand name under which any lodging or healthcare facility is operated.  A taxable REIT subsidiary is subject to federal income tax, and state and local income tax where applicable, as a regular C corporation.  In addition, a taxable REIT subsidiary may be prevented from deducting interest on debt funded directly or indirectly by its parent REIT if certain tests regarding the taxable REIT subsidiary’s debt to equity ratio and interest expense are not satisfied.  We currently own interests in several taxable REIT subsidiaries, and may acquire interests in additional taxable REIT subsidiaries in the future.  Our ownership of securities of our taxable REIT subsidiaries will not be subject to the 5% or 10% asset tests described below.  See “—Asset Tests.”

Income Tests.  We must satisfy two gross income requirements annually to maintain our qualification as a REIT:

·First, each taxable year, we must derive directly or indirectly at least 75% of our gross income, excluding gross income from prohibited transactions, from (a) certain investments relating to real property or mortgages on real property, including “rents from real property” and, in some circumstances, interest, or (b) some types of temporary investments; and

·Second, each taxable year, we must derive at least 95% of our gross income, excluding gross income from prohibited transactions or certain hedging transactions, from the real property investments described above, dividends, interest and gain from the sale or disposition of stock or securities, or from any combination of the foregoing.

For these purposes, the term “interest” generally does not include any amount received or accrued, directly or indirectly, if the determination of all or some of the amount depends in any way on the income or profits of any person.  However, an amount received or accrued generally will not be excluded from the term “interest” solely by reason of being based on a fixed percentage or percentages of receipts or sales.

Rents we receive from a tenant will qualify as “rents from real property” for the purpose of satisfying the gross income requirements for a REIT described above only if all of the following conditions are met:

·The amount of rent must not be based in any way on the income or profits of any person.  However, an amount we receive or accrue generally will not be excluded from the term “rents from real property” solely because it is based on a fixed percentage or percentages of receipts or sales;

·We, or an actual or constructive owner of 10% or more of our capital stock, must not actually or constructively own 10% or more of the interests in the assets or net profits of the tenant, or, if the tenant is a corporation, 10% or more of the voting power or value of all classes of stock of the tenant.  Rents we receive from such a tenant that also is our taxable REIT subsidiary, however, will not be excluded from the definition of “rents from real property” as a result of this condition if at least 90% of the space at the property to which the rents relate is leased to third parties, and the rents paid by the taxable REIT subsidiary are substantially comparable to rents paid by our other tenants for comparable space.  Whether rents paid by a taxable REIT subsidiary are substantially comparable to rents paid by other tenants is determined at the time the lease

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with the taxable REIT subsidiary is entered into, extended, and modified, if such modification increases the rents due under such lease.  Notwithstanding the foregoing, however, if a lease with a “controlled taxable REIT subsidiary” is modified and such modification results in an increase in the rents payable by such taxable REIT subsidiary, any such increase will not qualify as “rents from real property.”  For purposes of this rule, a “controlled taxable REIT subsidiary” is a taxable REIT subsidiary in which we own stock possessing more than 50% of the voting power or more than 50% of the total value of the outstanding stock;

·Rent attributable to personal property, leased in connection with a lease of real property, must not be greater than 15% of the total rent we receive under the lease.  If this condition is not met, then the portion of rent attributable to the personal property will not qualify as “rents from real property;” and

·We generally must not operate or manage the property or furnish or render services to our tenants, subject to a 1% de minimis exception and except as provided below.  We may, however, perform services that are “usually or customarily rendered” in connection with the rental of space for occupancy only and are not otherwise considered “rendered to the occupant” of the property.  Examples of such services include the provision of light, heat, or other utilities, trash removal and general maintenance of common areas.  In addition, we may employ an independent contractor from whom we derive no revenue to provide customary services, or a taxable REIT subsidiary, which may be wholly or partially owned by us, to provide both customary and non-customary services to our tenants without causing the rent we receive from those tenants to fail to qualify as “rents from real property.” Any amounts we receive from a taxable REIT subsidiary with respect to the taxable REIT subsidiary’s provision of non-customary services will, however, be nonqualifying income under the 75% gross income test and, except to the extent received through the payment of dividends, the 95% gross income test.

We generally do not intend to receive rent which fails to satisfy any of the above conditions.  Notwithstanding the foregoing, we may have taken and may continue to take actions which fail to satisfy one or more of the above conditions to the extent that we determine, based on the advice of our tax counsel, that those actions will not jeopardize our tax status as a REIT.

Income we receive that is attributable to the rental of parking spaces at our properties will constitute rents from real property for purposes of the REIT gross income tests if any services provided with respect to the parking facilities are performed by independent contractors from whom we derive no revenue, either directly or indirectly, or by a taxable REIT subsidiary, and certain other requirements are met.  With the exception of two parking facilities we operate, we believe that the income we receive that is attributable to parking facilities meets these tests and, accordingly, will constitute rents from real property for purposes of the REIT gross income tests.

From time to time, we enter into hedging transactions with respect to one or more of our assets or liabilities. Our hedging activities may include entering into interest rate swaps, caps, and floors, options to purchase these items, and futures and forward contracts. Any income we derive from a hedging transaction will be nonqualifying income for purposes of the 75% gross income test. Except to the extent provided by Treasury Regulations, however, income from a hedging transaction, including gain from the sale or disposition of such a transaction, entered into prior to January 1, 2005 will be qualifying income for purposes of the 95% gross income test, but only to the extent that the transaction hedges indebtedness incurred or to be incurred by us to acquire or carry real estate. Income from such a hedging transaction entered into on or after January 1, 2005 that is clearly identified as such as specified in the Internal Revenue Code will not constitute gross income for purposes of the 95% gross income test, and therefore will be exempt from this test. The term “hedging transaction,” as used above, generally means any transaction we enter into in the normal course of our business primarily to manage risk of interest rate changes or fluctuations with respect to borrowings made or to be made by us. To the extent that we hedge with other types of financial instruments, the income from those transactions is not likely to be treated as qualifying income for purposes of the gross income tests. We intend to structure any hedging transactions in a manner that does not jeopardize our status as a REIT.

We believe that the aggregate amount of our nonqualifying income, from all sources, in any taxable year will not exceed the limit on nonqualifying income under the gross income tests.  If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may nevertheless qualify as a REIT for the year if we are entitled to relief under certain provisions of the Internal Revenue Code.  Commencing with our taxable year beginning January 1, 2005, we generally may make use of the relief provisions if:

·following our identification of the failure to meet the 75% or 95% gross income tests for any taxable year, we file a schedule with the Internal Revenue Service setting forth each item of our gross income for purposes of the 75% or 95% gross income tests for such taxable year in accordance with Treasury Regulations to be issued; and

·our failure to meet these tests was due to reasonable cause and not due to willful neglect.

It is not possible, however, to state whether in all circumstances we would be entitled to the benefit of these relief provisions.  For example, if we fail to satisfy the gross income tests because nonqualifying income that we intentionally accrue or receive exceeds

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the limits on nonqualifying income, the Internal Revenue Service could conclude that our failure to satisfy the tests was not due to reasonable cause.  If these relief provisions do not apply to a particular set of circumstances, we will not qualify as a REIT.  As discussed above in “—Taxation of the Company—General,” even if these relief provisions apply, and we retain our status as a REIT, a tax would be imposed with respect to our nonqualifying income.  We may not always be able to comply with the gross income tests for REIT qualification despite our periodic monitoring of our income.

Prohibited Transaction Income.    Any gain that we realize on the sale of property held as inventory or otherwise held primarily for sale to customers in the ordinary course of business will be treated as income from a prohibited transaction that is subject to a 100% penalty tax.  Our gain would include any gain realized by our qualified REIT subsidiaries and our share of any gain realized by any of the partnerships or limited liability companies in which we own an interest.  This prohibited transaction income may also adversely affect our ability to satisfy the income tests for qualification as a REIT.  Under existing law, whether property is held as inventory or primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all the facts and circumstances surrounding the particular transaction.  We intend to hold our properties for investment with a view to long-term appreciation and to engage in the business of acquiring, developing and owning our properties.  We have made, and may in the future make, occasional sales of the properties consistent with our investment objectives.  We do not intend to enter into any sales that are prohibited transactions.  The Internal Revenue Service may contend, however, that one or more of these sales is subject to the 100% penalty tax.

Like-Kind Exchanges. We have in the past disposed of properties in transactions intended to qualify as like-kind exchanges under the Internal Revenue Code, and may continue this practice in the future. Such like-kind exchanges are intended to result in the deferral of gain for federal income tax purposes. The failure of any such transaction to qualify as a like-kind exchange could subject us to federal income tax, possibly including the 100% prohibited transaction tax, depending on the facts and circumstances surrounding the particular transaction.

Penalty Tax.  Any redetermined rents, redetermined deductions or excess interest we generate will be subject to a 100% penalty tax.  In general, redetermined rents are rents from real property that are overstated as a result of any services furnished by one of our taxable REIT subsidiaries to any of our tenants, and redetermined deductions and excess interest represent any amounts that are deducted by a taxable REIT subsidiary of ours for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations.  Rents we receive will not constitute redetermined rents if they qualify for certain safe harbor provisions contained in the Internal Revenue Code.

We believe that, in all instances in which our taxable REIT subsidiaries provide services to our tenants, the fees paid to such taxable REIT subsidiaries for such services are at arm’s-length rates, although the fees paid may not satisfy the safe harbor provisions referenced above.  These determinations are inherently factual, and the Internal Revenue Service has broad discretion to assert that amounts paid between related parties should be reallocated to clearly reflect their respective incomes.  If the Internal Revenue Service successfully made such an assertion, we would be required to pay a 100% penalty tax on the excess of an arm’s-length fee for tenant services over the amount actually paid.

Asset Tests.    At the close of each quarter of our taxable year, we also must satisfy four tests relating to the nature and diversification of our assets.

First, at least 75% of the value of our total assets, including assets held by our qualified REIT subsidiaries and our allocable share of the assets held by the partnerships and limited liability companies in which we own an interest, must be represented by real estate assets, cash, cash items and government securities.  For purposes of this test, the term “real estate assets” generally means real property (including interests in real property and interests in mortgages on real property) and shares (or transferable certificates of beneficial interest) in other REITs, as well as any stock or debt instrument attributable to the investment of the proceeds of a stock offering or a public debt offering with a term of at least five years, but only for the one-year period beginning on the date the REIT receives such proceeds.

Second, not more than 25% of the value of our total assets may be represented by securities other than those securities included in the 75% asset test.

Third, of the investments included in the 25% asset class and except for certain investments in other REITs and our qualified REIT subsidiaries and taxable REIT subsidiaries, the value of any one issuer’s securities may not exceed 5% of the value of our total assets, and we may not own more than 10% of the total vote or value of the outstanding securities of any one issuer.  Solely for purposes of the 10% value test, however, certain securities including, but not limited to “straight debt” securities having specified characteristics, loans to an individual or an estate, obligations to pay rents from real property and any securities issued by a REIT, are disregarded as securities.  In addition, commencing with our taxable year beginning January 1, 2005, solely for purposes of the 10% value test, the determination of our interest in the assets of a partnership or limited liability company in which we own an interest will

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be based on our proportionate interest in any securities issued by the partnership or limited liability company, excluding for this purpose certain securities described in the Internal Revenue Code.  For years prior to 2001, the 10% limit applies only with respect to voting securities of any issuer and not to the value of the securities of any issuer.

Fourth, not more than 20% of the value of our total assets may be represented by the securities of one or more taxable REIT subsidiaries.  The 20% asset test is effective for taxable years ending after December 31, 2000.

We currently own 100% of the outstanding stock of several subsidiaries that have elected, together with us, to be treated as taxable REIT subsidiaries.  So long as these subsidiaries qualify as taxable REIT subsidiaries, we will not be subject to the 5% asset test, the 10% voting securities limitation or the 10% value limitation with respect to our ownership of their securities.  We may acquire securities in other taxable REIT subsidiaries in the future.  We believe that the aggregate value of our taxable REIT subsidiaries will not exceed 20% of the value of our gross assets.  With respect to each issuer in which we currently own an interest that does not qualify as a REIT, a qualified REIT subsidiary or a taxable REIT subsidiary, we believe that our ownership of the securities of any such issuer has complied with the 5% value limitation, the 10% voting securities limitation and the 10% value limitation.  No independent appraisals have been obtained to support these conclusions.  In addition, there can be no assurance that the Internal Revenue Service will not disagree with our determinations of value.  We also own, and may continue to make, loans which must qualify under the “straight debt safe harbor” in order to satisfy the 10% value limitation described above.  We believe, based on the advice of our tax counsel, that all of these loans have qualified under this safe harbor.

The asset tests described above must be satisfied at the close of each quarter of our taxable year.  After initially meeting the asset tests at the close of any quarter, we will not lose our status as a REIT for failure to satisfy the asset tests at the end of a later quarter solely by reason of changes in asset values unless we (directly or through our partnerships or limited liability companies) acquire securities in the applicable issuer, increase our ownership of securities of such issuer (including as a result of increasing our interest in a partnership or limited liability company which owns such securities), or acquire other assets.  For example, our indirect ownership of securities of an issuer may increase as a result of our capital contributions to a partnership or limited liability company.  If we fail to satisfy an asset test because we acquire securities or other property during a quarter (including as a result of an increase in our interests in a partnership or limited liability company), we can cure this failure by disposing of sufficient nonqualifying assets within 30 days after the close of that quarter.  We believe that we have maintained and intend to maintain adequate records of the value of our assets to ensure compliance with the asset tests.  In addition, we intend to take such actions within 30 days after the close of any quarter as may be required to cure any noncompliance.

Certain relief provisions may be available to us if we discover a failure to satisfy the asset tests described above after the 30 day cure period.  Under these provisions, we will be deemed to have met the 5% and 10% REIT asset tests if the value of our nonqualifying assets (i) does not exceed the lesser of (a) 1% of the total value of our assets at the end of the applicable quarter or (b) $10,000,000, and (ii) we dispose of the nonqualifying assets or otherwise satisfy such asset tests within (a) six months after the last day of the quarter in which the failure to satisfy the asset tests is discovered or (b) the period of time prescribed by Treasury Regulations to be issued.  For violations of any of the asset tests due to reasonable cause and not due to willful neglect and that are, in the case of the 5% and 10% asset tests, in excess of the de minimis exception described above, we may avoid disqualification as a REIT after the 30 day cure period, by taking steps including (i) the disposition of sufficient nonqualifying assets, or the taking of other actions, which allow us to meet the asset tests within (a) six months after the last day of the quarter in which the failure to satisfy the asset tests is discovered or (b) the period of time prescribed by Treasury Regulations to be issued, (ii) paying a tax equal to the greater of (a) $50,000 or (b) the highest corporate tax rate multiplied by the net income generated by the nonqualifying assets, and (iii) disclosing certain information to the Internal Revenue Service.

Although we believe that we have satisfied the asset tests described above and plan to take steps to ensure that we satisfy such tests for any quarter with respect to which retesting is to occur, there can be no assurance that we will always be successful or will not require a reduction in our overall interest in an issuer (including in a taxable REIT subsidiary).  If we fail to cure any noncompliance with the asset tests in a timely manner and the relief provisions described above are not available, we would cease to qualify as a REIT.

Annual Distribution Requirements.  To maintain our qualification as a REIT, we are required to distribute dividends, other than capital gain dividends, to our stockholders in an amount at least equal to the sum of:

·90% of our “REIT taxable income”; and

·90% of our after tax net income, if any, from foreclosure property; minus

·the excess of the sum of specified items of our non-cash income items over 5% of our “REIT taxable income” as described below.

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For these purposes, our “REIT taxable income” is computed without regard to the dividends paid deduction and our net capital gain.  In addition, for purposes of this test, non-cash income means income attributable to leveling of stepped rents, original issue discount on purchase money debt, cancellation of indebtedness, and any like-kind exchanges that are later determined to be taxable.

In addition, if we dispose of any asset we acquired from a corporation which is or has been a C corporation in a transaction in which our basis in the asset is determined by reference to the basis of the asset in the hands of that C corporation (such as the Advisor), within the ten-year period following our acquisition of such asset, we would be required to distribute at least 90% of the after-tax gain, if any, we recognized on the disposition of the asset, to the extent that gain does not exceed the excess of (a) the fair market value of the asset, over (b) our adjusted basis in the asset, in each case, on the date we acquired the asset.

We generally must pay, or be treated as paying, the distributions described above in the taxable year to which they relate.  At our election, a distribution will be treated as paid in a taxable year if it is declared before we timely file our tax return for such year and paid on or before the first regular dividend payment after such declaration, provided such payment is made during the twelve-month period following the close of such year.  These distributions generally are taxable to our stockholders, other than tax-exempt entities, in the year in which paid.  This is so even though these distributions relate to the prior year for purposes of our 90% distribution requirement.  The amount distributed must not be preferential.  To avoid being preferential, every stockholder of the class of stock to which a distribution is made must be treated the same as every other stockholder of that class, and no class of stock may be treated other than according to its dividend rights as a class.  To the extent that we do not distribute all of our net capital gain, or distribute at least 90%, but less than 100%, of our “REIT taxable income,” as adjusted, we will be required to pay tax on the undistributed amount at regular corporate tax rates.  We believe we have made, and intend to continue to make, timely distributions sufficient to satisfy these annual distribution requirements and to minimize our corporate tax obligations.

We expect that our REIT taxable income will be less than our cash flow because of depreciation and other non-cash charges included in computing REIT taxable income.  Accordingly, we anticipate that we generally will have sufficient cash or liquid assets to enable us to satisfy the distribution requirements described above.  However, from time to time, we may not have sufficient cash or other liquid assets to meet these distribution requirements due to timing differences between the actual receipt of income and payment of deductible expenses, and the inclusion in income and deduction of expenses in determining our taxable income.  If these timing differences occur, we may be required to borrow funds or pay dividends in the form of taxable stock dividends in order to meet the distribution requirements.

Under certain circumstances, we may be able to rectify an inadvertent failure to meet the 90% distribution requirement for a year by paying “deficiency dividends” to stockholders in a later year, which may be include in our deduction for dividends paid for the earlier year.  Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends.  However, we will be required to pay interest to the Internal Revenue Service based upon the amount of any deduction claimed for deficiency dividends.

In addition, we will be required to pay a 4% excise tax to the extent we fail to distribute during each calendar year, at least the sum of 85% of our ordinary income for such year, 95% of our capital gain net income for the year and any undistributed taxable income from prior periods.  Any ordinary income and net capital gain on which this excise tax is imposed for any year is treated as an amount distributed during that year for purposes of calculating such tax.

For purposes of the 90% distribution requirement and excise tax described above, distributions declared during the last three months of the taxable year, payable to stockholders of record on a specified date during such period and paid during January of the following year, will be treated as paid by us and received by our stockholders on December 31 of the year in which they are declared.

Failure to Qualify

Specified cure provisions are available to us in the event that we discover a violation of a provision of the Internal Revenue Code that would result in our failure to qualify as a REIT. Except with respect to violations of the REIT income tests and assets tests (for which the cure provisions are described above), and provided the violation is due to reasonable cause and not due to willful neglect, these cure provisions generally impose a $50,000 penalty for each violation in lieu of a loss of REIT status.  If we fail to qualify for taxation as a REIT in any taxable year, and the relief provisions of the Internal Revenue Code do not apply, we will be required to pay tax, including any applicable alternative minimum tax, on our taxable income at regular corporate tax rates.  Distributions to our stockholders in any year in which we fail to qualify as a REIT will not be deductible by us, and we will not be required to distribute any amounts to our stockholders.  As a result, we anticipate that our failure to qualify as a REIT would reduce the cash available for distribution by us to our stockholders.  In addition, if we fail to qualify as a REIT, all distributions to our stockholders will be taxable as regular corporate dividends to the extent of our current and accumulated earnings and profits.  In this event, subject to certain limitations under the Internal Revenue Code, corporate distributees may be eligible for the dividends-received deduction.  Unless entitled to relief under specific statutory provisions, we will also be disqualified from taxation as a REIT for the

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four taxable years following the year in which we lost our qualification.  It is not possible to state whether in all circumstances we would be entitled to this statutory relief.

Tax Aspects of the Partnerships

General.  We own, directly or indirectly, interests in various partnerships and limited liability companies which are treated as partnerships or disregarded entities for federal income tax purposes and may own interests in additional partnerships and limited liability companies in the future.  Our ownership interests in such partnerships and limited liability companies involve special tax considerations.  These special tax considerations include, for example, the possibility that the Internal Revenue Service might challenge the status of one or more of the partnerships or limited liability companies in which we own an interest as partnerships or disregarded entities, as opposed to associations taxable as corporations, for federal income tax purposes.  If a partnership or limited liability company in which we own an interest, or one or more of its subsidiary partnerships or limited liability companies, were treated as an association, it would be taxable as a corporation and would therefore be subject to an entity-level tax on its income.  In this situation, the character of our assets and items of gross income would change, and could prevent us from satisfying the REIT asset tests and possibly the REIT income tests.  See “—Taxation of the Company—Asset Tests” and “—Taxation of the Company—Income Tests.”  This, in turn, could prevent us from qualifying as a REIT.  See “—Failure to Qualify” for a discussion of the effect of our failure to meet these tests.  In addition, a change in the tax status of one or more of the partnerships or limited liability companies in which we own an interest might be treated as a taxable event.  If so, we might incur a tax liability without any related cash distributions.

Treasury Regulations that apply for tax periods beginning on or after January 1, 1997, provide that a domestic business entity not organized or otherwise required to be treated as a corporation (an “eligible entity”) may elect to be taxed as a partnership or disregarded entity for federal income tax purposes.  Unless it elects otherwise, an eligible entity in existence prior to January 1, 1997, will have the same classification for federal income tax purposes that it claimed under the entity classification Treasury Regulations in effect prior to this date.  In addition, an eligible entity which did not exist or did not claim a classification prior to January 1, 1997, will be classified as a partnership or disregarded entity for federal income tax purposes unless it elects otherwise.  All of the partnerships and limited liability companies in which we own an interest intend to claim classification as partnerships or disregarded entities under these Treasury Regulations.  As a result, we believe that these partnerships and limited liability companies will be classified as partnerships or disregarded entities for federal income tax purposes

Allocations of Income, Gain, Loss and Deduction.    A partnership or limited liability company agreement generally will determine the allocation of income and losses among partners or members.  These allocations, however, will be disregarded for tax purposes if they do not comply with the provisions of Section 704(b) of the Internal Revenue Code and the related Treasury Regulations.  Generally, Section 704(b) of the Internal Revenue Code and the related Treasury Regulations require that partnership and limited liability company allocations respect the economic arrangement of the partners and members.  If an allocation is not recognized for federal income tax purposes, the relevant item will be reallocated according to the partners’ or members’ interests in the partnership or limited liability company, as the case may be.  This reallocation will be determined by taking into account all of the facts and circumstances relating to the economic arrangement of the partners or members with respect to such item.  The allocations of taxable income and loss in each of the partnerships and limited liability companies in which we own an interest are intended to comply with the requirements of Section 704(b) of the Internal Revenue Code and the applicable Treasury Regulations.

Tax Allocations with Respect to the Properties.    Under Section 704(c) of the Internal Revenue Code, income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership or limited liability company in exchange for an interest in the partnership or limited liability company must be allocated in a manner so that the contributing partner or member is charged with the unrealized gain or benefits from the unrealized loss associated with the property at the time of the contribution.  The amount of the unrealized gain or loss generally is equal to the difference between the fair market value or book value and the adjusted tax basis of the contributed property at the time of contribution.  These allocations are solely for federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners or members.  Some of the partnerships and/or limited liability companies in which we own an interest were formed by way of contributions of appreciated property.  The relevant partnership and/or limited liability company agreements require that allocations be made in a manner consistent with Section 704(c) of the Internal Revenue Code.  This could cause us to be allocated lower amounts of depreciation deductions for tax purposes than would be allocated to us if the contributed properties were acquired in a cash purchase, and could cause us to be allocated taxable gain upon a sale of the contributed properties in excess of the economic or book income allocated to us as a result of such sale.  These adjustments could make it more difficult for us to satisfy the REIT distribution requirements.

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Tax Liabilities and Attributes Inherited From CRP

We may inherit tax liabilities and tax attributes from CRP as a result of the merger.  If CRP failed to qualify as a REIT for any of its taxable years, it would be required to pay federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates.  Unless statutory relief provisions apply, CRP would be disqualified from treatment as a REIT for the four taxable years following the year during which it lost qualification.  Because the merger will be treated for income tax purposes as if CRP sold all of its assets in a taxable transaction, if CRP did not qualify as a REIT for the tax year of the merger, it would be subject to tax in respect of the built-in gain in all of its assets because it would not be eligible for the dividends paid deduction that is available to a REIT.  “Built-in gain” generally means the excess of the fair market value of an asset over its adjusted tax basis.  We, as the successor-in-interest to CRP, would be required to pay these taxes.  Furthermore, after the merger, the asset and income tests described in “Taxation of the Company—Income Tests” and “Taxation of the Company—Asset Tests” will apply to all of our assets, including the assets we acquire from CRP, and to all of our income, including the income derived from the assets we acquire from CRP.  As a result, the nature of the assets that we acquire from CRP and the income we derive from those assets may have an effect on our tax status as a REIT.

It is a condition to the closing of the merger that CRP’s REIT counsel render an opinion to us, dated as of the closing date of the merger, to the effect that CRP qualified as a REIT under the Internal Revenue Code for the taxable years ending December 31, 1999 through December 31, 2005, CRP is organized in conformity with the requirements for qualification as a REIT, and CRP’s method of operation has enabled it to satisfy the requirements for qualification as a REIT under the Internal Revenue Code for the taxable years ending on or prior to the closing date of the merger.  This opinion will be based on various assumptions and representations as to factual matters, including representations made by CRP in a factual certificate provided by one of its officers, as well as other oral and written statements of officers and other representatives of CRP and others as to the existence and consequence of certain factual and other matters.  CRP’s ability to achieve and maintain qualification as a REIT through the closing date of the merger depends upon its ability to achieve and maintain certain diversity of stock ownership requirements and, through actual annual operating results, certain requirements under the Internal Revenue Code regarding its income, assets and distribution levels.  No assurance can be given that the actual ownership of CRP’s stock and its actual operating results and distributions for any taxable year satisfy the tests necessary for CRP to have achieved and maintained its status as a REIT.

Tax Liabilities and Attributes Inherited from the Advisor

As a result of the Advisor merger, we will succeed to the assets and the liabilities of the Advisor, including any liabilities for unpaid taxes and any tax liabilities created in connection with the Advisor merger.  It is a condition to the closing of the Advisor merger that we receive an opinion of our counsel in the Advisor merger and that the Advisor and the Advisor stockholders receive an opinion of their counsel substantially to the effect that, on the basis of the facts, representations and assumptions set forth or referred to in such opinions, for federal income tax purposes the Advisor merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.  To the extent that the Advisor merger so qualifies, no gain or loss will be recognized by the Advisor or by us in the Advisor merger.  Our tax basis in the Advisor’s assets acquired in merger will be equal to the Advisor’s tax basis in such assets immediately prior to the merger.  If we dispose of such assets in a taxable transaction during the ten-year period beginning on the date of the Advisor merger, then we will be required to pay tax at the highest regular corporate tax rate on the gain recognized to the extent of the excess of (a) the fair market value of the asset over (b) our adjusted basis in the asset, in each case determined as of the date of the Advisor merger. The opinions of counsel to be delivered in connection with the Advisor merger represent the best legal judgment of our counsel and counsel to the Advisor and the Advisor stockholders and are not binding on the Internal Revenue Service or the courts. No rulings from the Internal Revenue Service have been or will be requested by us or the Advisor regarding the tax consequences of the Advisor merger, and there can be no assurance that the Internal Revenue Service will agree with the conclusions in the above-described opinions.

If the Advisor merger does not qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, the Advisor merger would be treated as a sale of the Advisor’s assets to us in a taxable transaction, and the Advisor would recognize taxable gain.  In such a case, we, as the Advisor’s successor-in-interest, would be required to pay the tax on any such gain.  In addition, our tax basis in the Advisor’s assets would be equal to the merger consideration paid to the Advisor stockholders, which could be higher than the tax basis of such assets if the Advisor merger qualified as a reorganization.  This higher tax basis would cause us to have higher depreciation deductions and lower gain on the sale of the Advisor assets.

As a result of the Advisor merger and assuming it qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, we will succeed to the tax attributes and earnings and profits of the Advisor.  To qualify as a REIT, we must distribute any such earnings and profits by the close of the taxable year in which the Advisor merger occurs.  Any adjustments of the Advisor’s income for taxable years ending on or before the Advisor merger, including as a result of an examination of the Advisor’s tax returns by the Internal Revenue Service, could affect the calculation of the Advisor’s earnings and profits.  If the Internal Revenue Service were to determine that we acquired earnings and profits from the Advisor that we failed to distribute prior to the end of the taxable year in which the Advisor merger occurs, we could avoid disqualification as a REIT by using “deficiency dividend”

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procedures.  Under these procedures, we generally would be required to distribute any such earnings and profits to our stockholders within 90 days of the determination and pay a statutory interest charge at a specified rate to the Internal Revenue Service.

Other Tax Consequences

We may be required to pay tax in various state or local jurisdictions, including those in which we transact business, and our stockholders may be required to pay tax in various state or local jurisdictions, including those in which they reside.  Our state and local tax treatment may not conform to the federal income tax consequences discussed above.  In addition, a stockholder’s state and local tax treatment may not conform to the federal income tax consequences discussed above.  Consequently, prospective investors should consult their tax advisors regarding the effect of state and local tax laws on an investment in our shares.

Taxation of Taxable U.S. Stockholders Generally

When we use the term “U.S. stockholder,” we mean a holder of shares of our common stock who, for federal income tax purposes:

·is a citizen or resident of the United States;

·is a corporation, partnership, limited liability company or other entity treated as a corporation or partnership for federal income tax purposes created or organized in or under the laws of the United States or of any State thereof or in the District of Columbia unless, in the case of a partnership or limited liability company, Treasury Regulations provide otherwise;

·is an estate the income of which is subject to federal income taxation regardless of its source; or

·is a trust whose administration is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust.  Notwithstanding the preceding sentence, to the extent provided in the Treasury Regulations, certain trusts in existence on August 20, 1996, and treated as United States persons prior to this date that elect to continue to be treated as United States persons, shall also be considered U.S. stockholders.

If you hold shares of our common stock and are not a U.S. stockholder, you are a “non-U.S. stockholder.”  See “—Taxation of Non-U.S. Shareholders” below.

Distributions Generally.  Distributions out of our current or accumulated earnings and profits will be treated as dividends and, other than capital gain dividends and certain amounts that have previously been subject to corporate level tax, discussed below, will be taxable to our taxable U.S. stockholders as ordinary income.  See “—Tax Rates” below.  As long as we qualify as a REIT, these distributions will not be eligible for the dividends-received deduction in the case of U.S. stockholders that are corporations.  For purposes of determining whether distributions to holders of our common stock are out of current or accumulated earnings and profits, our earnings and profits will be allocated first to our outstanding preferred stock and then to our outstanding common stock.

To the extent that we make distributions on our common stock in excess of our current and accumulated earnings and profits, these distributions will be treated first as a tax-free return of capital to a U.S. stockholder.  This treatment will reduce the U.S. stockholder’s adjusted tax basis in its shares of our common stock by the amount of the distribution, but not below zero.  Distributions in excess of our current and accumulated earnings and profits and in excess of a U.S. stockholder’s adjusted tax basis in its shares will be taxable as capital gain.  Such gain will be taxable as long-term capital gain if the shares have been held for more than one year.  Dividends we declare in October, November, or December of any year and which are payable to a stockholder of record on a specified date in any of these months will be treated as both paid by us and received by the stockholder on December 31 of that year, provided we actually pay the dividend on or before January 31 of the following year.  U.S. stockholders may not include in their own income tax returns any of our net operating losses or capital losses.

Capital Gain Dividends.  Dividends that we properly designate as capital gain dividends will be taxable to taxable U.S. stockholders as gains from the sale or disposition of a capital asset, to the extent that such gains do not exceed our actual net capital gain for the taxable year.  These gains may be taxable to non-corporate U.S. stockholders at a 15% or 25% rate.  U.S. stockholders that are corporations may, however, be required to treat up to 20% of some capital gain dividends as ordinary income. If we properly designate any portion of a dividend as a capital gain dividend then, except as otherwise required by law, we are required by the terms of our corporate charter to allocate a portion of the total capital gain dividends paid or made available to holders of all classes of our stock for the year to the holders in proportion to the amount that our total dividends, as determined for federal income tax purposes, paid or made available to the holders of such stock for the year bears to the total dividends, as determined for federal income tax purposes, paid or made available to holders of all classes of our stock for the year.

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Retention of Net Capital Gains.  We may elect to retain, rather than distribute as a capital gain dividend, all or a portion of our net capital gains.  If we make this election, we would pay tax on our retained net capital gains.  In addition, to the extent we so elect, a U.S. stockholder generally would:

·include its pro rata share of our undistributed net capital gains in computing its long-term capital gains in its return for its taxable year in which the last day of our taxable year falls, subject to certain limitations as to the amount that is includable;

·be deemed to have paid the capital gains tax imposed on it on the designated amounts included in the U.S. stockholder’s long-term capital gains;

·receive a credit or refund for the amount of tax deemed paid by it;

·increase the adjusted basis of its common stock by the difference between the amount of includable gains and the tax deemed to have been paid by it; and

·in the case of a U.S. stockholder that is a corporation, appropriately adjust its earnings and profits for the retained capital gains in accordance with Treasury Regulations to be promulgated by the Internal Revenue Service.

Passive Activity Losses and Investment Interest Limitations.  Distributions we make and gain arising from the sale or exchange by a U.S. stockholder of our shares will not be treated as passive activity income.  As a result, U.S. stockholders generally will not be able to apply any “passive losses” against this income or gain.  A U.S. stockholder may elect to treat capital gain dividends, capital gains from the disposition of stock and qualified dividend income as investment income for purposes of computing the investment interest limitation, but in such case, the stockholder will be taxed at ordinary income rates on such amount.  Other distributions made by us, to the extent they do not constitute a return of capital, generally will be treated as investment income for purposes of computing the investment interest limitation.

Dispositions of Our Common Stock.  If a U.S. stockholder sells or disposes of shares of our common stock to a person other than us (or to us in a manner that qualifies as a redemption for federal income tax purposes), it will recognize gain or loss for federal income tax purposes in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale or other disposition and its adjusted basis in the shares for tax purposes.  This gain or loss, except as provided below, will be long-term capital gain or loss if the holder has held the common stock for more than one year.  If, however, a U.S. stockholder recognizes loss upon the sale or other disposition of our common stock that it has held for six months or less, after applying certain holding period rules, the loss recognized will be treated as a long-term capital loss, to the extent the U.S. stockholder received distributions from us which were required to be treated as long-term capital gains. The Internal Revenue Service has the authority to prescribe, but has not yet prescribed, Treasury Regulations that would apply to a capital gain tax rate of 25% (which is higher than the long-term capital gain tax rates for non-corporate stockholders) to a portion of capital gain realized by a non-corporate holder on the sale of shares of our common stock that would correspond to the REIT’s “unrecaptured Section 1250 gain.”

Tax Rates

The maximum tax rate for non-corporate taxpayers for (1) capital gains, including certain “capital gain dividends,” has generally been reduced to 15% (although depending on the characteristics of the assets which produced these gains and on designations which we may make, certain capital gain dividends may be taxed at a 25% rate) and (2) “qualified dividend income” has generally been reduced to 15%.  In general, dividends payable by REITs are not eligible for the reduced tax rate on corporate dividends, except to the extent that certain holding requirements have been met and the REIT’s dividends are attributable to dividends received from taxable corporations (such as its taxable REIT subsidiaries), to income that was subject to tax at the corporate/REIT level (for example, if it distributed taxable income that it retained and paid tax on in the prior taxable year), or to dividends properly designated by the REIT as “capital gain dividends.”  The currently applicable provisions of the federal income tax laws relating to the 15% tax rate are currently scheduled to “sunset” or revert to the provisions of prior law effective for taxable years beginning after December 31, 2010, at which time the capital gains tax rate will be increased to 20% and the rate applicable to dividends will be increased to the tax rate then applicable to ordinary income.

Backup Withholding

We report to our U.S. stockholders and the Internal Revenue Service the amount of dividends paid during each calendar year, and the amount of any tax withheld.  Under the backup withholding rules, a stockholder may be subject to backup withholding with respect to dividends paid unless the holder is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact, or provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with applicable requirements of the backup withholding rules.  A U.S. stockholder that does not provide us with its correct taxpayer identification number may also be subject to penalties imposed by the Internal Revenue Service.  Backup

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withholding is not an additional tax.  Any amount paid as backup withholding will be creditable against the stockholder’s federal income tax liability.  In addition, we may be required to withhold a portion of capital gain distributions to any stockholders who fail to certify their non-foreign status.  See “— Taxation of Non-U.S. Stockholders.”

Taxation of Tax-Exempt Stockholders

Dividend income from us and gain arising upon a sale of shares of our common stock generally will not be unrelated business taxable income to a tax-exempt stockholder, except as described below.  This income or gain will be unrelated business taxable income, however, if a tax-exempt stockholder holds its shares as “debt-financed property” within the meaning of the Internal Revenue Code or if the shares are used in a trade or business of the tax-exempt stockholder.  Generally, debt-financed property is property the acquisition or holding of which was financed through a borrowing by the tax-exempt stockholder.

For tax-exempt stockholders which are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, or qualified group legal services plans exempt from federal income taxation under Sections 501(c)(7), (c)(9), (c)(17) or (c)(20) of the Internal Revenue Code, respectively, income from an investment in our shares will constitute unrelated business taxable income unless the organization is able to properly claim a deduction for amounts set aside or placed in reserve for specific purposes so as to offset the income generated by its investment in our shares.  These prospective investors should consult their tax advisors concerning these “set aside” and reserve requirements.

Notwithstanding the above, however, a portion of the dividends paid by a “pension-held REIT” may be treated as unrelated business taxable income as to certain trusts that hold more than 10%, by value, of the interests in the REIT.  A REIT will not be a “pension-held REIT” if it is able to satisfy the “not closely held” requirement without relying on the “look-through” exception with respect to certain trusts or if such REIT is not “predominantly held” by “qualified trusts.”  As a result of limitations on the transfer and ownership of stock contained in our charter, we do not expect to be classified as a “pension-held REIT,” and as a result, the tax treatment described in this paragraph should be inapplicable to our stockholders.  However, because our stock is publicly traded, we cannot guarantee that this will always be the case.

Taxation of Non-U.S. Stockholders

The following discussion addresses the rules governing United States federal income taxation of the ownership and disposition of our common stock by non-U.S. stockholders.  When we use the term “non-U.S. stockholder” we mean stockholders who are not U.S. stockholders as described above under “—Taxation of Taxable U.S. Stockholders Generally.”  In general, non-U.S. stockholders may be subject to special tax withholding requirements on distributions from us and with respect to their sale or other disposition of our common stock, except to the extent reduced or eliminated by an income tax treaty between the U.S. and the non-U.S. stockholder’s country.  A non-U.S. stockholder who is a stockholder of record and is eligible for reduction or elimination of withholding must file an appropriate form with us in order to claim such treatment.  Non-U.S. stockholders should consult their own tax advisors concerning the federal income tax consequences to them of an acquisition of shares of our common stock, including the federal income tax treatment of dispositions of interests in and the receipt of distributions from us.

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PLAN OF DISTRIBUTION

This prospectus relates to the possible issuance by us of up to 699,454 shares of our common stock if, and to the extent that, holders of non-managing member units tender such non-managing member units for redemption and we elect, in our discretion, to satisfy this redemption obligation by issuing shares of our common stock. The registration of such shares does not necessarily mean that any of the non-managing member units will be tendered for redemption or that we will issue any of the common stock to satisfy such redemption obligation, of that if issued, such shares will be offered or sold by the recipient thereof. Upon the redemption of any non-managing member units, we may elect to pay cash for the non-managing member units rather than issue common stock.

We will not receive any proceeds from the issuance of the shares of common stock pursuant to this prospectus to holders of non-managing member units tendered for redemption, but we will acquire units in exchange for any shares of our common stock we may issue pursuant to this prospectus.

LEGAL MATTERS

The validity of the shares of our common stock offered hereby will be passed upon for us by Ballard Spahr Andrews & Ingersoll, LLP, Baltimore, Maryland. In addition, the description of material federal income tax consequences contained in this prospectus under the heading “United States Federal Income Tax Considerations” is based upon the opinion of Latham & Watkins LLP. In rendering this opinion, Latham & Watkins LLP will assume the accuracy of an opinion of Ballard Spahr Andrews & Ingersoll, LLP, as to certain matters of Maryland law.

EXPERTS

The consolidated financial statements and schedule of Health Care Property Investors, Inc. for the year ended December 31, 2005 appearing in Health Care Property Investors, Inc.’s Current Report (Form 8-K) dated June 30 2006, and Health Care Property Investors, Inc. management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 included in Health Care Property Investors, Inc.’s Annual Report (Form 10-K) for the year ended December 31, 2005, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon, included therein, and incorporated herein by reference. Such consolidated financial statements and schedule, and management’s assessment  have been incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

The audited historical financial statements of CRP as of December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005 and management's assessment of the effectiveness of internal control over financial reporting (which is included in Management's Report on Internal Control over Financial Reporting) as of December 31, 2005 included on Exhibit 99.3 of our Current Report on Form 8-K dated August 4, 2006 and the audited historical financial statements of the Advisor and its subsidiaries as of December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, included on Exhibit 99.5 of our Current Report on Form 8-K dated August 4, 2006, have been so incorporated in reliance on the reports of PricewaterhouseCoopers LLP, an independent registered certified public accounting firm, given on the authority of said firm as experts in auditing and accounting. The report on the financial statements of the Advisor contains an emphasis of a matter paragraph relating to the advisory services provided to CRP as described in Note 1 to the financial statements.

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699,454 Shares

Health Care Property Investors, Inc.

Common Stock

PROSPECTUS

August  4, 2006

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14.    Other expenses of issuance and distribution.

The estimated expenses in connection with this offering are estimated as follows:

SEC Registration Fee	$	2,013
*Blue Sky fees and expense	14,000
*Legal fees and expenses	34,000
*Accounting fees and expenses	8,000
*Transfer agent and listing fees	14,000
*Miscellaneous	7,987
Total	$	80,000

*Estimates

Item 15.    Indemnifications of directors and officers.

Our charter (the “Charter”) limits the liability of our directors and officers to the company and our stockholders for money damages to the fullest extent permitted by the laws of the State of Maryland. The Maryland General Corporation Law presently permits the liability of directors and officers to a corporation or its stockholders for money damages to be limited, except (i) to the extent that it is proved that the director or officer actually received an improper benefit or profit or (ii) if the judgment or other final adjudication is entered in a proceeding based on a finding that the directors or officers action, or failure to act, was a result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. The provisions of the Charter do not limit the ability of us or our stockholders to obtain other relief, such as injunction or rescission.

Article X of our Third Amended and Restated Bylaws (the “Bylaws”) provides that we shall indemnify and hold harmless, in the manner and to the fullest extent permitted by law, any person who is or was a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the company, and whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that such person is or was our director or officer, or, as our director or officer, is or was serving at the request of us as a director, officer, trustee, partner, member, agent or employee of another corporation, partnership, limited liability company, association, joint venture, trust, benefit plan or other enterprise. To the fullest extent permitted by law, such indemnification shall include expenses (including attorneys’ fees), judgment, fines and amounts paid in settlement and any such expenses may be paid by us in advance of the final disposition of such action, suit or proceeding and without requiring a preliminary determination as to the ultimate entitlement to indemnification. However, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation. In addition, the Maryland General Corporation Law requires a corporation, as a condition to advancing expenses, to obtain (a) a written affirmation by the director or officer of his good faith belief that he has met the standard of conduct necessary for indemnification by such corporation as authorized by the Maryland General Corporation Law and (b) a written statement by or on his behalf to repay the amount paid or reimbursed by such corporation if it shall ultimately be determined that the standard of conduct was not met.

Article X of the Bylaws further provides that we may, with the approval of our board of directors, provide such indemnification and advancement of expenses as set forth in the above paragraph to our agents and employees.

Section 2-418 of the Maryland General Corporation Law requires a corporation, unless its charter provides otherwise, which the Charter does not, to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he is made a party by reason of his service in that capacity, or in the defense of any claim, issue or matter in the proceeding. Section 2-418 of the Maryland General Corporation Law generally permits indemnification of any director or officer made a party to any proceedings by reason of service as a director or officer unless it is established that (i) the act or omission of such person was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; (ii) such person actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, such person had reasonable cause to believe that the act or omission was unlawful. The indemnity may include judgments, penalties, fines, settlements and reasonable expenses actually incurred by the director or officer in connection with the proceeding; provided, however, that if the proceeding is one by, or in the right of the corporation, indemnification is not permitted with respect to any proceeding in which the director or officer has been adjudged to be liable to the corporation. In addition, a director or officer may not be indemnified with respect to any proceeding charging improper personal benefit to the director or officer adjudged to be liable on the basis that personal benefit was improperly received. The termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent or an entry of an order of probation prior to judgment creates a rebuttable presumption that the director or officer did not meet the requisite standard of conduct required for permitted indemnification. The termination of any proceeding by judgment, order or settlement, however, does not create a presumption that the director or officer failed to meet the requisite standard of conduct for permitted indemnification.

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Item 16.    Exhibits.

See Exhibit Index.

Item 17.    Undertakings.

(a)  The undersigned registrant hereby undertakes:

(1)  To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i)To include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii)To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.  Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii)To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of this registration statement.

(2)  That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.

(3)  To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4)  That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

(B) Each prospectus required to be filed pursuant to Rule 424(b)(2), 424(b)(5), or 424(b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), 415(a)(1)(vii), or 415(a)(1)(x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of the securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.

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(5)  That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii)Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv)Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(b)  The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c)  The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information.

(d)  Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Long Beach, California, on August 4, 2006.

HEALTH CARE PROPERTY INVESTORS, INC.
By:	/s/ James F. Flaherty III
	James F. Flaherty III President and Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below appoints James F. Flaherty III, Mark A. Wallace and Edward J. Henning, and each of them, as his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement and any subsequent registration statement thereto pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by each of the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/ James F. Flaherty III	President, Chief Executive Officer and Director (Principal Executive Officer)	August 4, 2006
James F. Flaherty III
/s/ Mark A. Wallace	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	August 4, 2006
Mark A. Wallace
/s/ George P. Doyle	Vice President—Chief Accounting Officer (Principal Accounting Officer)	August 4, 2006
George P. Doyle
/s/ Kenneth B. Roath	Director	August 4, 2006
Kenneth B. Roath
/s/ Mary A. Cirillo-Goldberg	Director	August 4, 2006
Mary A. Cirillo-Goldberg
/s/ Robert R. Fanning, Jr.	Director	August 4, 2006
Robert R. Fanning, Jr.
/s/ David B. Henry	Director	August 4, 2006
David B. Henry
/s/ Michael D. McKee	Director	August 4, 2006
Michael D. McKee

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/s/ Harold M. Messmer, Jr.	Director	August 4, 2006
Harold M. Messmer, Jr.
/s/ Peter L. Rhein	Director	August 4, 2006
Peter L. Rhein
/s/ Richard M. Rosenberg	Director	August 4, 2006
Richard M. Rosenberg
/s/ Joseph P. Sullivan	Director	August 4, 2006
Joseph P. Sullivan

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EXHIBIT INDEX

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated May 1, 2006, by and among Health Care Property Investors, Inc., CNL Retirement Properties, Inc. and Ocean Acquisition 1, Inc. (incorporated by reference to exhibit 2.1 to HCP’s report on form 8-K, dated May 1, 2006).
4.1	Articles of Restatement of HCP (incorporated by reference to exhibit 3.1 to HCP’s report on Form 10-Q for the period of September 30, 2004).
4.2	Third Amended and Restated Bylaws of HCP (incorporated by reference to exhibit 3.2 to HCP’s report on Form 10-Q for the period of September 30, 2004).
4.3	Indenture, dated as of September 1, 1993, between HCP and The Bank of New York, as Trustee (incorporated by reference to exhibit 4.1 to HCP’s registration statement on Form S-3 dated September 9, 1993).
4.4	Form of Fixed Rate Note (incorporated by reference to exhibit 4.2 to HCP’s registration statement on Form S-3 dated March 20, 1989).
4.5	Form of Floating Rate Note (incorporated by reference to exhibit 4.3 to HCP’s registration statement on Form S-3 dated March 20, 1989).
4.6	Registration Rights Agreement dated November 20, 1998 between HCP and James D. Bremner (incorporated by reference to exhibit 4.8 to HCP’s annual report on Form 10-K for the year ended December 31, 1999). This exhibit is identical in all material respects to two other documents except the parties thereto. The parties to these other documents, other than HCP, were James P. Revel and Michael F. Wiley.
4.7	Registration Rights Agreement dated January 20, 1999 between HCP and Boyer Castle Dale Medical Clinic, L.L.C. (incorporated by reference to exhibit 4.9 to HCP’s annual report on Form 10-K for the year ended December 31, 1999). This exhibit is identical in all material respects to 13 other documents except the parties thereto. The parties to these other documents, other than HCP, were Boyer Centerville Clinic Company, L.C., Boyer Elko, L.C., Boyer Desert Springs, L.C., Boyer Grantsville Medical, L.C., Boyer-Ogden Medical Associates, LTD., Boyer Ogden Medical Associates No. 2, LTD., Boyer Salt Lake Industrial Clinic Associates, LTD., Boyer-St. Mark’s Medical Associates, LTD., Boyer McKay-Dee Associates, LTD., Boyer St. Mark’s Medical Associates #2, LTD., Boyer Iomega, L.C., Boyer Springville, L.C., and—Boyer Primary Care Clinic Associates, LTD. #2.
4.8	Indenture, dated as of January 15, 1997, between American Health Properties, Inc. and The Bank of New York, as trustee (incorporated herein by reference to exhibit 4.1 to American Health Properties, Inc.’s current report on Form 8-K (file no. 001-09381), dated January 21, 1997).
4.9	First Supplemental Indenture, dated as of November 4, 1999, between HCP and The Bank of New York, as trustee (incorporated by reference to HCP’s quarterly report on Form 10-Q for the period ended September 30, 1999).
4.10	Registration Rights Agreement dated August 17, 2001 between HCP, Boyer Old Mill II, L.C., Boyer-Research Park Associates, LTD., Boyer Research Park Associates VII, L.C., Chimney Ridge, L.C., Boyer-Foothill Associates, LTD., Boyer Research Park Associates VI, L.C., Boyer Stansbury II, L.C., Boyer Rancho Vistoso, L.C., Boyer-Alta View Associates, LTD., Boyer Kaysville Associates, L.C., Boyer Tatum Highlands Dental Clinic, L.C., Amarillo Bell Associates, Boyer Evanston, L.C., Boyer Denver Medical, L.C., Boyer Northwest Medical Center Two, L.C., and Boyer Caldwell Medical, L.C. (incorporated by reference to exhibit 4.12 to HCP’s annual report on Form 10-K for the year ended December 31, 2001).
4.11	Acknowledgment and Consent dated as of March 1, 2005 by and among Merrill Lynch Bank USA, Gardner Property Holdings, L.C., HCPI/Utah, LLC, the unit holders of HCPI/Utah, LLC and HCP (incorporated by reference to exhibit 4.12 to HCP’s annual report on Form 10-K for the year ended December 31, 2004).*
4.12	Acknowledgment and Consent dated as of March 1, 2005 by and among Merrill Lynch Bank USA, The Boyer Company, L.C., HCPI/Utah, LLC, the unit holders of HCPI/Utah, LLC and HCP (incorporated by reference to exhibit 4.13 to HCP’s annual report on Form 10-K for the year ended December 31, 2004).*
4.13	Officers’ Certificate pursuant to Section 301 of the Indenture dated as of September 1, 1993 between the Company and The Bank of New York, as Trustee, establishing a series of securities entitled “6.5% Senior Notes due February 15, 2006” (incorporated by reference to exhibit 4.1 to HCP’s report on form 8-K, dated February 21, 1996).
4.14	Officers’ Certificate pursuant to Section 301 of the Indenture dated as of September 1, 1993 between the Company and The Bank of New York, as Trustee, establishing a series of securities entitled “67¤8% MandatOry Par Put Remarketed Securities due June 8, 2015” (incorporated by reference to exhibit 4.1 to HCP’s report on form 8-K, dated June 3, 1998).

4.15	Officers’ Certificate pursuant to Section 301 of the Indenture dated as of September 1, 1993 between the Company and The Bank of New York, as Trustee, establishing a series of securities entitled “6.45% Senior Notes due June 25, 2012” (incorpiorated by reference to exhibit 4.1 to HCP’s report on form 8-K, dated June 19, 2002).
4.16	Officers’ Certificate pursuant to Section 301 of the Indenture dated as of September 1, 1993 between HCP and the Bank of New York, as Trustee, establishing a series of securities entitled “6.00% Senior Notes due March 1, 2015” (incorporated by reference to exhibit 3.1 to HCP’s report on form 8-K (file no. 001-08895), dated February 25, 2003).
4.17	Officers’ Certificate pursuant to Section 301 of the Indenture dated as of September 1, 1993 between the Company and The Bank of New York, as Trustee, establishing a series of securities entitled “55¤8% Senior Notes due May 1, 2017” (incorporated by reference to exhibit 4.2 to HCP’s report on form 8-K, dated April 22, 2005).
4.18	Registration Rights Agreement dated October 1, 2003 between HCP, Charles Crews, Charles A. Elcan, Thomas W. Hulme, Thomas M. Klaritch, R. Wayne Price, Glenn T. Preston, Janet Reynolds, Angela M. Playle, James A. Croy, John Klaritch as Trustee of the 2002 Trust F/B/O Erica Ann Klaritch, John Klaritch as Trustee of the 2002 Trust F/B/O Adam Joseph Klaritch, John Klaritch as Trustee of the 2002 Trust F/B/O Thomas Michael Klaritch, Jr. and John Klaritch as Trustee of the 2002 Trust F/B/O Nicholas James Klaritch (incorporated by reference to exhibit 4.16 to HCP’s quarterly report on Form 10-Q for the period ended September 30, 2003).
4.19	Amended and Restated Dividend Reinvestment and Stock Purchase Plan, dated October 23, 2003 (incorporated by reference to HCP’s registration statement on Form S-3 dated December 5, 2003, registration number 333-110939).
4.20	Specimen of Stock Certificate representing the Series E Cumulative Redeemable Preferred Stock, par value $1.00 per share (incorporated herein by reference to exhibit 4.1 of HCP’s 8-A12B filed on September 12, 2003).
4.21	Specimen of Stock Certificate representing the Series F Cumulative Redeemable Preferred Stock, par value $1.00 per share (incorporated herein by reference to exhibit 4.1 of HCP’s 8-A12B filed on December 2, 2003).
4.22	Form of Floating Rate Note (incorporated by reference to exhibit 4.3 to HCP’s Current Report on Form 8-K dated November 19, 2003).
4.23	Form of Fixed Rate Note (incorporated by reference to exhibit 4.4 to HCP’s Current Report on Form 8-K dated November 19, 2003).
4.24	Acknowledgment and Consent dated as of March 1, 2005 by and among Merrill Lynch Bank USA, Gardner Property Holdings, L.C., HCPI/Utah II, LLC, the unit holders of HCPI/Utah II, LLC and HCP (incorporated by reference to exhibit 4.21 to HCP’s annual report on Form 10-K for the year ended December 31, 2004).*
4.25	Acknowledgment and Consent dated as of March 1, 2005 by and among Merrill Lynch Bank USA, The Boyer Company, L.C., HCPI/Utah II, LLC, the unit holders of HCPI/Utah II, LLC and HCP (incorporated by reference to exhibit 4.22 to HCP’s annual report on Form 10-K for the year ended December 31, 2004).*
4.26	Registration Rights Agreement dated July 22, 2005 between HCP, William P. Gallaher, Trustee for the William P. & Cynthia J. Gallaher Trust, Dwayne J. Clark, Patrick R. Gallaher, Trustee for the Patrick R. & Cynthia M. Gallaher Trust, Jeffrey D. Civian, Trustee for the Jeffrey D. Civian Trust dated August 8, 1986, Jeffrey Meyer, Steven L. Gallaher, Richard Coombs, Larry L. Wasem, Joseph H. Ward, Jr., Trustee for the Joseph H. Ward, Jr. and Pamela K. Ward Trust, Borue H. O’Brien, William R. Mabry, Charles N. Elsbree, Trustee for the Charles N. Elsbree Jr. Living Trust dated February 14, 2002, Gary A. Robinson, Thomas H. Persons, Trustee for the Persons Family Revocable Trust under trust dated February 15, 2005, Glen Hammel, Marilyn E. Montero, Joseph G. Lin, Trustee for the Lin Revocable Living Trust, Ned B. Stein, John Gladstein, Trustee for the John & Andrea Gladstein Family Trust dated February 11, 2003, John Gladstein, Trustee for the John & Andrea Gladstein Family Trust dated February 11, 2003, Francis Connelly, Trustee for the The Francis J & Shannon A Connelly Trust, Al Coppin, Trustee for the Al Coppin Trust, Stephen B. McCullagh, Trustee for the Stephen B. & Pamela McCullagh Trust dated October 22, 2001, and Larry L. Wasem—SEP IRA (incorporated by reference to exhibit 4.24 to HCP’s quarterly report on Form 10-Q for the period ended June 30, 2005).
+5.1	Opinion of Ballard Spahr Andrews & Ingersoll, LLP regarding the validity of the Common Stock being registered.
+8.1	Opinion of Latham & Watkins LLP regarding tax matters.
+10.1	Amended and Restated Limited Liability Company Agreement of HCP DR California, LLC dated July 22, 2005.
+23.1	Consent of Ernst & Young LLP
+23.2	Consent of PricewaterhouseCoopers LLP (CRP)
+23.3	Consent of PricewaterhouseCoopers LLP (Advisor)
23.4	Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit 5.1).
23.5	Consent of Latham & Watkins LLP (included in Exhibit 8.1).
24.1	Power of Attorney (included on the signature page of this registration statement).

 +  filed herewith

 *  Management Contract or Compensatory Plan or Arrangement.

EX-5.1

Exhibit 5.1

[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP]

August 4, 2006

Health Care Property Investors, Inc.

3760 Kilroy Airport Way

Suite 300

Long Beach, California 90806

Re: Health Care Property Investors, Inc., a Maryland corporation (the “Company”) -Registration Statement on Form S-3 pertaining to Six Hundred Ninety-Nine Thousand Four Hundred Fifty-Four (699,454) shares (the “Shares”) of common stock of the Company, par value one dollar ($1.00) per share (“Common Stock”), to be issued to certain holders (the “Unit Holders”) of non-managing member units (the “Units”) in HCP DR California, LLC, a Delaware limited liability company (the “LLC”), upon exchange of such Units

Ladies and Gentlemen:

We have acted as Maryland corporate counsel to the Company in connection with the registration of the Shares under the Securities Act of 1933, as amended (the “Act”), by the Company on Form S-3, filed or to be filed with the Securities and Exchange Commission (the “Commission”) on or about August 4, 2006. You have requested our opinion with respect to the matters set forth below.

In our capacity as Maryland corporate counsel to the Company and for the purposes of this opinion, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents (collectively, the “Documents”):

(i)the corporate charter of the Company (the “Charter”), consisting of Articles of Restatement filed with the State Department of Assessments and Taxation of Maryland (the “Department”) on August 2, 2004 and Articles of Merger filed with the Department on November 30, 2004;

(ii)the Third Amended and Restated Bylaws of the Company, dated as of July 22, 2004 (the “Bylaws”);

(iii)the Minutes of the Organizational Action of the Board of Directors of the Company, dated March 21, 1985 (the “Organizational Minutes”);

(iv)resolutions adopted by the Board of Directors of the Company on July 27, 2006 (the “Directors’ Resolutions”);

(v)the Amended and Restated Limited Liability Company Agreement of the LLC, dated as of July 22, 2005 (the “LLC Agreement”);

(vi)a certificate of Edward J. Henning, the Senior Vice President, General Counsel and Corporate Secretary of the Company, of even date herewith (the “Officer’s Certificate”), to the effect that, among other things, the Charter, the Bylaws, the Organizational Minutes, the Directors’ Resolutions and the LLC Agreement are true, correct and complete, have not been rescinded or modified and are in full force and effect on the date of the Officer’s Certificate;

(vii)the Registration Statement on Form S-3 and the related form of prospectus included therein, in substantially the form filed or to be filed with the Commission pursuant to the Act (the “Registration Statement”);

(viii)a status certificate of the Department, dated as of a recent date, to the effect that the Company is duly incorporated and existing under the laws of the State of Maryland; and

(ix)such other laws, records, documents, certificates, opinions and instruments as we have deemed necessary to render this opinion, subject to the limitations, assumptions and qualifications noted below.

In reaching the opinions set forth below, we have assumed the following:

(a)each person executing any instrument, document or agreement on behalf of any party (other than the Company) is duly authorized to do so;

(b)each natural person executing any instrument, document or agreement is legally competent to do so;

(c)any of the Documents submitted to us as originals are authentic; the form and content of any Documents submitted to us as unexecuted drafts do not differ in any respect relevant to this opinion from the form and content of such documents as executed and delivered; any of the Documents submitted to us as certified or photostatic copies conform to the original

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documents; all signatures on all of the Documents are genuine; all public records reviewed or relied upon by us or on our behalf are true and complete; all statements and information contained in the Documents are true and complete; there has been no modification of, or amendment to, any of the Documents, and there has been no waiver of any provision of any of the Documents by action or omission of the parties or otherwise;

(d)upon the issuance of the Shares subsequent to the date hereof, the total number of shares of Common Stock of the Company issued and outstanding on the date subsequent to the date hereof on which the Shares are issued will not exceed the total number of shares of Common Stock that the Company is authorized to issue under the Charter;

(e)none of the Shares will be issued or transferred in violation of the provisions of Article V of the Charter relating to restrictions on ownership and transfer of stock or the provisions of Article V of the Charter relating to business combinations; and

(f)none of the Shares will be issued and sold to an Interested Stockholder of the Company or an Affiliate thereof, all as defined in Subtitle 6 of Title 3 of the Maryland General Corporation Law (the “MGCL”), in violation of Section 3-602 of the MGCL.

Based on the foregoing, and subject to the assumptions and qualifications set forth herein, it is our opinion that, as of the date of this letter:

1.The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Maryland.

2.The Shares have been duly reserved and authorized for issuance by all necessary corporate action on the part of the Company, and if, as and when such Shares are issued and delivered by the Company to the Unit Holders in exchange for Units of the LLC, upon and subject to the terms and conditions set forth in the LLC Agreement and the Directors’ Resolutions, such Shares will be duly authorized, validly issued, fully paid and non-assessable.

The foregoing opinion is limited to the substantive laws of the State of Maryland, and we do not express any opinion herein concerning any other law. We express no opinion as to the applicability or effect of any federal or state securities laws, including the securities laws of the State of Maryland, or as to federal or state laws regarding fraudulent transfers. To the

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extent that any matter as to which our opinion is expressed herein would be governed by any jurisdiction other than the State of Maryland, we do not express any opinion on such matter.

This opinion letter is issued as of the date hereof and is necessarily limited to laws now in effect and facts and circumstances presently existing and brought to our attention. We assume no obligation to supplement this opinion letter if any applicable laws change after the date hereof, or if we become aware of any facts or circumstances that now exist or that occur or arise in the future and may change the opinions expressed herein after the date hereof.

We consent to your filing this opinion as an exhibit to the Registration Statement and further consent to the filing of this opinion as an exhibit to the applications to securities commissioners for the various states of the United States for registration of the Shares. We also consent to the identification of our firm as Maryland counsel to the Company in the section of the Registration Statement entitled “Legal Matters”. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Act.

Very truly yours,

/s/ Ballard Spahr Andrews & Ingersoll, LLP

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EX-8.1

Exhibit 8.1

	633 West Fifth Street, Suite 4000
	Los Angeles, California 90071-2007
	Tel: (213) 485-1234 Fax: (213) 891-8763
	www.lw.com
	FIRM / AFFILIATE OFFICES
	Brussels	New York
	Chicago	Northern Virginia
	Frankfurt	Orange County
	Hamburg	Paris
	Hong Kong	San Diego
	London	San Francisco
August 4, 2006	Los Angeles	Shanghai
	Milan	Silicon Valley
	Moscow	Singapore
	Munich	Tokyo
	New Jersey	Washington, D.C.

Health Care Property Investors, Inc.

3760 Kilroy Airport Way, Suite 300

Long Beach, California 90806

Re:	Health Care Property Investors, Inc.
Registration Statement on Form S-3

Ladies and Gentlemen:

We have acted as tax counsel to Health Care Property Investors, Inc., a Maryland corporation (the “Company”), in connection with the filing of a registration statement on Form S-3 on August 4, 2006 (such registration statement, together with the documents incorporated by reference therein, the “Registration Statement”) by the Company with the Securities and Exchange Commission (the “Commission”) relating to the registration of 699,454 shares of common stock, par value $1.00 per share, as set forth in the prospectus contained in the Registration Statement (the “Prospectus”).

You have requested our opinion concerning certain of the federal income tax considerations relating to the Company, including with respect to its election to be taxed as a real estate investment trust (a “REIT”). This opinion is based on various facts and assumptions, including the facts set forth in the Registration Statement and the Prospectus concerning the business, assets and governing documents of the Company and its subsidiaries. We have also been furnished with, and with your consent have relied upon, certain representations made by the Company and its subsidiaries with respect to certain factual matters through a certificate of an officer of the Company (the “Officer’s Certificate”). With your permission, we have assumed the accuracy of the opinions of Ballard Spahr Andrews & Ingersoll, LLP, counsel for the Company, dated as of August 4, 2006 with respect to certain matters of Maryland law.

In our capacity as tax counsel to the Company, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to our satisfaction of such documents, corporate records and other instruments as we have deemed necessary or appropriate for purposes of this opinion. For purposes of our opinion, we have not made an independent investigation or audit of the facts set forth in the above referenced documents or in the Officer’s Certificate. In addition, in rendering this opinion we have assumed the truth and accuracy of all representations and statements made to us which are

qualified as to knowledge or belief, without regard to such qualification. In our examination, we have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures thereon, the legal capacity of natural persons executing such documents and the conformity to authentic original documents of all documents submitted to us as copies.

We are opining herein only as to the federal income tax laws of the United States, and we express no opinion with respect to the applicability thereto, or the effect thereon, of other federal laws, the laws of any state or other jurisdiction or as to any matters of municipal law or the laws of any other local agencies within any state.

Based on such facts, assumptions and representations, it is our opinion that:

1.The Company was organized and has operated in conformity with the requirements for qualification as a REIT under the Internal Revenue Code of 1954 for its taxable years ending December 31, 1985 and 1986 and in conformity with the requirements for qualification as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ending December 31, 1987, and its proposed method of operation will enable the Company to continue to meet the requirements for qualification and taxation as a REIT under the Code; and

2.The statements in the Prospectus set forth under the caption “United States Federal Income Tax Considerations” insofar as they purport to summarize certain provisions of the agreements, statutes or regulations referred to therein, are accurate summaries in all material respects.

No opinion is expressed as to any matter not discussed herein.

This opinion is rendered to you as of the date of this letter, and we undertake no obligation to update this opinion subsequent to the date hereof. This opinion is based on various statutory provisions, regulations promulgated thereunder and interpretations thereof by the Internal Revenue Service and the courts having jurisdiction over such matters, all of which are subject to change either prospectively or retroactively. Any such change may affect the conclusions stated herein. Also, any variation or difference in the facts from those set forth in the Registration Statement, Prospectus or the Officer’s Certificate may affect the conclusions stated herein. As described in the Prospectus, the Company’s qualification and taxation as a REIT depend upon the Company’s ability to meet the various qualification tests imposed under the Code, including through actual annual operating results, asset composition, distribution levels and diversity of stock ownership, the results of which have not been and will not be reviewed by Latham & Watkins LLP. Accordingly, no assurance can be given that the actual results of the Company’s operation for any particular taxable year will satisfy such requirements.

This opinion is rendered only to you and is solely for your benefit in connection with the Registration Statement. This opinion may not be relied upon by you for any other purpose, or furnished to, assigned to, quoted to or relied upon by any other person, firm or other entity for any purpose without our prior written consent, which may be granted or withheld in our

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discretion, except that this opinion may be relied upon by persons entitled to rely on it pursuant to applicable provisions of federal securities law.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm name therein under the captions “United States Federal Income Tax Considerations” and “Legal Matters.”  In giving this consent, we do not hereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules or regulations of the Commission promulgated thereunder.

Very truly yours,

/s/ Latham & Watkins LLP

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EX-10.1

Exhibit 10.1

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT


OF


HCP DR CALIFORNIA, LLC,


a Delaware limited liability company

Dated as of July 22, 2005

TABLE OF CONTENTS

		Page
ARTICLE I. DEFINED TERMS		1
ARTICLE II. ORGANIZATIONAL MATTERS		20
2.1	Formation	20
2.2	Name	20
2.3	Registered Office and Agent; Principal Place of Business; Other Places of Business	20
2.4	Power of Attorney	21
2.5	Term	22
ARTICLE III. PURPOSE		22
3.1	Purpose and Business	22
3.2	Powers	22
3.3	Specified Purposes	23
3.4	Representations and Warranties by the Members; Disclaimer of Certain Representations	23
ARTICLE IV. CAPITAL CONTRIBUTIONS		25
4.1	Capital Contributions of the Initial Members	25
4.2	Additional Members	25
4.3	Loans and Incurrence and Payment of Debt	25
4.4	Additional Funding and Capital Contributions	26
4.5	No Interest; No Return	26
ARTICLE V. DISTRIBUTIONS		27
5.1	Requirement and Characterization of Distributions	27
5.2	Distributions in Kind	28
5.3	Amounts Withheld	28
5.4	Distributions Upon Liquidation	28
5.5	Restricted Distributions	29
5.6	Distributions of Proceeds from Sale of Properties and Refinancing Debt	29
5.7	Distributions Following Redemption	31
5.8	Offsets	31
5.9	Special Managing Member Distribution Calculation	31
ARTICLE VI. ALLOCATIONS		31
6.1	Timing and Amount of Allocations of Net Income and Net Loss	31
6.2	General Allocations	31
6.3	Additional Allocation Provisions	33
6.4	Tax Allocations	35
6.5	Other Provisions	35

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6.6	Amendments to Allocation to Reflect Issuance of Additional Membership Interests	36
ARTICLE VII. MANAGEMENT AND OPERATION OF BUSINESS		36
7.1	Management	36
7.2	Certificate of Formation	40
7.3	Restrictions on Managing Member’s Authority	41
7.4	Compensation of the Managing Member	47
7.5	Other Business of Managing Member	48
7.6	Contracts with Affiliates	48
7.7	Indemnification	48
7.8	Liability of the Managing Member	50
7.9	Other Matters Concerning the Managing Member	51
7.10	Title to Company Assets	52
7.11	Reliance by Third Parties	52
ARTICLE VIII. RIGHTS AND OBLIGATIONS OF MEMBERS		52
8.1	Limitation of Liability	52
8.2	Managing of Business	52
8.3	Outside Activities of Members	53
8.4	Return of Capital	53
8.5	Rights of Non-Managing Members Relating to the Company	53
8.6	Redemption Rights	54
ARTICLE IX. BOOKS, RECORDS, ACCOUNTING AND REPORTS		57
9.1	Records and Accounting	57
9.2	Fiscal Year	57
9.3	Reports	57
9.4	Cooperation Regarding Tax Matters Relating to Contributed Properties	57
ARTICLE X. TAX MATTERS		59
10.1	Preparation of Tax Returns	59
10.2	Tax Elections	59
10.3	Tax Matters Partner	59
10.4	Organizational Expenses	59
ARTICLE XI. TRANSFERS AND WITHDRAWALS		59
11.1	Transfer	59
11.2	Transfer of Managing Member’s Membership Interest	60
11.3	Non-Managing Members’ Rights to Transfer	61
11.4	Substituted Members	62
11.5	Assignees	63
11.6	General Provisions	63
ARTICLE XII. ADMISSION OF MEMBERS		65
12.1	Admission of Initial Non-Managing Members	65

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12.2		Admission of Successor Managing Member	65
12.3		Admission of Additional Members	66
12.4		Amendment of Agreement and Certificate	66
12.5		Limitation on Admission of Members	67
ARTICLE XIII. DISSOLUTION, LIQUIDATION AND TERMINATION			67
13.1		Dissolution	67
13.2		Redemption of Non-Managing Member Units	68
13.3		Winding Up	68
13.4		Deemed Contribution and Distribution	69
13.5		Rights of Members	70
13.6		Notice of Dissolution	70
13.7		Cancellation of Certificate	70
13.8		Reasonable Time for Winding-Up	70
13.9		Liability of Liquidator	70
ARTICLE XIV. PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS; AMENDMENTS; MEETINGS			71
14.1		Procedures for Actions and Consents of Members	71
14.2		Amendments	71
14.3		Meetings of the Members	71
ARTICLE XV. GENERAL PROVISIONS			72
15.1		Addresses and Notice	72
15.2		Titles and Captions	72
15.3		Pronouns and Plurals	72
15.4		Further Action	73
15.5		Binding Effect	73
15.6		Creditors	73
15.7		Waiver	73
15.8		Counterparts	73
15.9		Applicable Law	73
15.10		Entire Agreement	73
15.11		Invalidity of Provisions	74
15.12		No Partition	74
15.13		Non-Managing Member Representative	74
15.14		Uniform Commercial Code Article 8 (Opt-In)	74
Exhibit A	Member Information		A-1
Exhibit B	Notice of Redemption		B-1
Exhibit C	Form of Joinder Agreement		C-1
Exhibit D	Example of Certain Calculations Pursuant to Section 5.6.C		D-1
Exhibit E	Form of Bottom Dollar Guarantee		E-1

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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
HCP DR CALIFORNIA, LLC

THIS LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) is made and entered into as of July 22, 2005, by and among Health Care Property Investors, Inc., a Maryland corporation (the “Managing Member”), and the Persons whose names are set forth on Exhibit A attached hereto as “Non-Managing Members” (collectively, the “Non-Managing Members,” and together with Managing Member, the “Members”), for the purpose of forming HCP DR CALIFORNIA, LLC, a Delaware limited liability company (the “Company”).

RECITALS

A.Managing Member, the Company, Aegis Assisted Living, LLC (“Aegis”), Oakmont Senior Living, LLC (“Oakmont”) and each of the parties identified on the signature page thereto as a “Transferor” (each, a “Contributor”) entered into that certain Contribution and Purchase and Sale Agreement and Joint Escrow Instructions dated as of July 22,  2005 (the “Contribution Agreement”), providing, among other things, for the contribution of certain assets to, and the acquisition of certain interests in, the Company;

B.Each Contributor may, in accordance with the limited liability company operating agreement, partnership agreement or other organizational documents of such Contributor and subject to the terms of the Contribution Agreement, concurrent with the Effective Date distribute or otherwise assign to its constituent members, partners, equity holders or certain affiliates thereof its right to receive Non-Managing Member Units pursuant to Section 4 hereof;

C.It is a condition to the closing of the transactions contemplated by the Contribution Agreement that the parties hereto enter into this Agreement;

AGREEMENT

NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I.
DEFINED TERMS

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

“Accounting Firm” has the meaning set forth in Section 7.3.H hereof.

“Act” means the Delaware Limited Liability Company Act, as it may be amended from time to time, and any successor to such statute.

“Actions” has the meaning set forth in Section 7.7 hereof.

“Additional Funds” has the meaning set forth in Section 4.4.A hereof.

“Additional Member” means a Person admitted to the Company as a Member pursuant to Section 4.2 hereof.

“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

(a)decrease such deficit by any amounts that such Member is obligated to restore pursuant to this Agreement or by operation of law upon liquidation of such Member’s Membership Interest or is deemed to be obligated to restore pursuant to Regulation Section 1.704-1(b)(2)(ii)(c) or the penultimate sentence of each of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

(b)increase such deficit by the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of “Adjusted Capital Account Deficit” is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

“Adjustment Factor” means 1.0; provided, however, that in the event that: (a) the Managing Member (i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (ii) splits or subdivides its outstanding REIT Shares or (iii) effects a reverse stock split or otherwise combines its outstanding REIT Shares into a smaller number of REIT Shares, the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor in effect immediately prior to such adjustment by a fraction, (1) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or combination has occurred as of such time) and (2) the denominator of which shall be the actual number of REIT Shares issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or combination has not occurred as of such time); (b) the Managing Member distributes any rights, options or warrants to all holders of its REIT Shares to subscribe for or to purchase or to otherwise acquire REIT Shares (or other securities or rights convertible into, exchangeable for or exercisable for REIT Shares) at a price per share less than the Value of a REIT Share on the record date for such distribution (each a “Distributed Right”), then the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor previously in effect by a fraction, (i) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date plus the maximum number of REIT Shares purchasable under such Distributed Rights and (ii) the denominator of which shall be the number of REIT Shares issued and outstanding on the record date plus a fraction, (1) the numerator of which is the maximum number of REIT Shares

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purchasable under such Distributed Rights times the minimum purchase price per REIT Share under such Distributed Rights and (2) the denominator of which is the Value of a REIT Share as of the record date; provided, however, that, if any such Distributed Rights expire or become no longer exercisable, then the Adjustment Factor shall be adjusted, effective retroactive to the date of distribution of the Distributed Rights, to reflect a reduced maximum number of REIT Shares or any change in the minimum purchase price for the purposes of the above fractions; and (c) the Managing Member shall, by dividend or otherwise, distribute to all holders of its REIT Shares evidences of its indebtedness or assets (including securities, but excluding any dividend or distribution referred to in subsection (a) above), which evidences of indebtedness or assets relate to assets not received by the Managing Member pursuant to a pro rata distribution by the Company, then the Adjustment Factor shall be adjusted to equal the amount determined by multiplying the Adjustment Factor in effect immediately prior to the close of business on the date fixed for determination of shareholders entitled to receive such distribution by a fraction, (i) the numerator shall be such Value of a REIT Share on the date fixed for such determination and (ii) the denominator shall be the Value of a REIT Share on the dated fixed for such determination less the then fair market value (as reasonably determined by the Managing Member) of the portion of the evidences of indebtedness or assets so distributed applicable to one REIT Share. Any adjustments to the Adjustment Factor shall become effective immediately after the effective date of such event, retroactive to the record date, if any, for such event.

“Aegis” has the meaning set forth in Recital A hereof.

“Affiliate” means, with respect to any Person, any Person directly or indirectly Controlling or Controlled by or under common Control with such Person.

“Aggregate Sharing Amount” means, with respect to any taxable disposition of a Contributed Property or Successor Property, an amount equal to the excess, if any, of (i) the Property Appreciation with respect to all Contributed Properties or Successor Properties being sold or previously sold by the Company, over (ii) the Unit Appreciation with respect to all Contributed Properties or Successor Properties being sold or previously sold by the Company.

“Agreement” means this Amended and Restated Limited Liability Company Agreement of HCP DR CALIFORNIA, LLC, as it may be amended, supplemented or restated from time to time.

“Applicable Contributor” means with respect to any Non-Managing Member, a Contributor that distributed or otherwise assigned its right to receive Non-Managing Member Units pursuant to Section 4 hereof and the Contribution Agreement.

“Applicable Parent” means with respect to any Contributor, (i) Aegis, if Aegis prior to the Effective Date owned a direct or indirect interest in such Contributor or (ii) Oakmont, if Oakmont prior to the Effective Date owned a direct or indirect interest in such Contributor.

“Appraisal” means, with respect to any assets, the written opinion of an independent third party experienced in the valuation of similar assets in the general location of the property being appraised, selected by the Managing Member in good faith. Such opinion

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may be in the form of an opinion by such independent third party that the value for such property or asset as set by the Managing Member is fair, from a financial point of view, to the Company.

“Appraised Value” means, with respect to any asset, including any Contributed Property, the value of such asset as determined by an Appraisal.

“Assignee” means a Person to whom one or more LLC Units have been Transferred in a manner permitted under this Agreement, but who has not become a Substituted Member, and who has the rights set forth in Section 11.5 hereof.

“Available Cash” means, with respect to any period for which such calculation is being made:

(a)the sum, without duplication, of:

(i)the Company’s net income or net loss (as the case may be) for such period determined in accordance with GAAP,

(ii)depreciation and all other noncash charges to the extent deducted in determining net income or net loss for such period pursuant to the foregoing clause (a)(i),

(iii)the amount of any reduction in reserves of the Company (including, without limitation, reductions resulting because the Managing Member determines such amounts are no longer necessary), and

(iv)all other cash received (including, but not limited to amounts previously accrued as net income and amounts of deferred income but excluding any net amounts borrowed by the Company for such period) that was not included in determining net income or net loss for such period pursuant to the foregoing clause (a)(i);

(b)less the sum, without duplication, of:

(i)all principal debt payments made during such period by the Company,

(ii)capital expenditures made by the Company during such period,

(iii)all other expenditures and payments (including any loans made by the Company pursuant to the terms of this Agreement) not deducted in determining net income or net loss for such period pursuant to the foregoing clause (a)(i) (including amounts paid in respect of expenses previously accrued),

(iv)any amount included in determining net income or net loss for such period pursuant to the foregoing clause (a)(i) that was not received by the Company during such period, and

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(v)the amount of any increase in reserves (including, without limitation, working capital reserves) established during such period that the Managing Member determines are necessary or appropriate in its sole and absolute discretion.

Notwithstanding the foregoing, Available Cash shall not include (i) any cash received or reductions in reserves, or take into account any disbursements made, or reserves established, after dissolution and the commencement of the liquidation and winding up of the Company, (ii) any Capital Contributions, whenever received, (iii) any Disposition Proceeds or (iii) any Refinancing Debt Proceeds.

“Bankruptcy Law” means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.

“Beneficial Ownership” means ownership of REIT Shares by a Person who is or would be treated as an owner of such REIT Shares either actually or constructively through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms “Beneficially Own,” “Beneficially Owned,” “Beneficially Owns” and “Beneficial Owner” shall have the correlative meanings.

“Built-in Gain” means the excess of (i) the gross fair market value of one or more of the Contributed Properties or Successor Properties) over (ii) the adjusted tax basis of such Contributed Property or Successor Property (as the case may be) for federal income tax purposes, as determined as of the Effective Date and as reduced from time to time in accordance with applicable provisions of the Code and Regulations.

“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in Los Angeles, California are authorized or required by law to close.

“Calendar Quarter” means each of the following periods of each year:  January 1 through and including March 31; April 1 through and including June 30; July 1 through and including September 30; and October 1 through and including December 31.

“Call Notice” means a written notice to the Non-Managing Members informing them of the Managing Member’s election to call their Non-Managing Member Units pursuant to Section 13.2 hereof.

“Capital Account” means, with respect to any Member, the Capital Account maintained for such Member on the Company’s books and records in accordance with the following provisions:

(a)To each Member’s Capital Account, there shall be added such Member’s Capital Contributions, such Member’s allocable share of Net Income and any items of income or gain specially allocated pursuant to Section 6.3 hereof, and the amount of any Company liabilities assumed by such Member or that are secured by any property distributed to such Member.

(b)From each Member’s Capital Account, there shall be subtracted the amount of cash and the Gross Asset Value of any property distributed to such Member pursuant

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to any provision of this Agreement, such Member’s allocable share of Net Loss and any items of loss or deductions specially allocated pursuant to Section 6.3 hereof, and the amount of any liabilities of such Member assumed by the Company or that are secured by any property contributed by such Member to the Company.

(c)In the event any interest in the Company is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent that it relates to the Transferred interest.

(d)In determining the principal amount of any liability for purposes of subsections (a) and (b) above there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations.

(e)The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a manner consistent with such Regulations. If the Managing Member shall determine that it is prudent to modify the manner in which the Capital Accounts are maintained in order to comply with such Regulations, the Managing Member may make such modification provided that such modification will not have a material effect on the amounts distributable to any Member without such Member’s Consent. The Managing Member also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any appropriate modifications in the event that unanticipated events might otherwise cause this Agreement not to comply with Regulations Sections 1.704-1(b) or 1.704-2 provided that such modification will not have a material effect on the amounts distributable to any Member without such Member’s Consent.

“Capital Contribution” means, with respect to any Member, the amount of money and the initial Gross Asset Value of any Property (including, without limitation, any Contributed Property) that such Member contributes to the Company pursuant to Sections 4.1, 4.2 or 4.4 hereof.

“Cash Amount” means an amount of cash per LLC Unit equal to the product of (i) the Value of a REIT Share and (ii) the REIT Shares Amount determined as of the applicable Valuation Date.

“Certificate” means the Certificate of Formation of the Company filed in the office of the Secretary of State of the State of Delaware, as amended from time to time in accordance with the terms hereof and the Act.

“Charter” means the Articles of Incorporation of the Managing Member, as amended, supplemented or restated from time to time.

“Closing Price” means the closing price of a REIT Share on the New York Stock Exchange.

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“Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time or any successor statute thereto, as interpreted by the applicable Regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.

“Company” means the limited liability company formed under the Act and pursuant to this Agreement, and any successor thereto.

“Company Minimum Gain” has the meaning set forth in Regulations Section 1.704-2(b)(2) for the phrase “partnership minimum gain,” and the amount of Company Minimum Gain, as well as any net increase or decrease in Company Minimum Gain, for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).

“Consent” means the consent to, approval of, or vote on a proposed action by a Member given in accordance with Article 14 hereof.

“Consent of the Non-Managing Members” means the Consent of a Majority in Interest of the Non-Managing Members, which Consent shall be obtained prior to the taking of any action for which it is required by this Agreement and, except as otherwise provided in this Agreement, may be given or withheld by a Majority in Interest of the Non-Managing Members, in their reasonable discretion.

“Constructive Ownership” means ownership of REIT Shares, or any other interest in an entity, by a Person who is or would be treated as an owner thereof either actually or constructively through the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructively Own,” “Constructively Owned,” “Constructively Owns” and “Constructive Owner” shall have the correlative meanings.

“Contributed Properties” means the “Properties” as that term is defined in the Contribution Agreement (each, a “Contributed Property”). In no event shall “Contributed Properties” include any properties contributed by Managing Member.

 “Contribution Agreement” shall have the meaning given to such term in Recital A above.

“Contributor” shall have the meaning given to such term in Recital A above.

“Contributor’s Contribution Liability” means with respect to any Contributor, any amounts owing or otherwise alleged to be owing by such Contributor to the Company or the Managing Member pursuant to the Contribution Agreement, including any such amounts for which such Contributor or such Contributor’s Applicable Parent is otherwise liable pursuant and subject to the provisions of Article XII (Indemnification) thereof.

“Contributor’s Members” means, as to any Contributor, the constituent members, partners, other equity holders or certain affiliates of such Contributor to whom such Contributor has distributed or otherwise assigned, in accordance with the limited liability company agreement, partnership agreement or other organizational documents of such Contributor and

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subject to the terms of the Contribution Agreement, the right of such Contributor to receive Non-Managing Member Units pursuant to Section 4.1 hereof.

“Control” means, when used with respect to any Person, the possession directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have correlative meanings.

“Custodian” means any receiver, trustee, assignee, liquidator or other similar official under any Bankruptcy Law.

“Debt” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services; (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person; (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person’s interest in such property, even though such Person has not assumed or become liable for the payment thereof; and (iv) lease obligations of such Person that, in accordance with GAAP, should be capitalized.

“Depreciation” means, for each Fiscal Year or other applicable period, an amount equal to the federal income tax depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that, if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or period, Depreciation shall be in an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that, if the federal income tax depreciation, amortization or other cost recovery deduction for such year or period is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managing Member.

“Disposition Proceeds” means the net proceeds (i.e., after the repayment of any Debt and the payment of all costs related to the disposition) received by the Company upon the taxable disposition of one or more, but not all, of the Contributed Properties or Successor Properties.

 “Effective Date” means the date on which the transactions contemplated by the Contribution Agreement are consummated, at which time the contributions set forth on Exhibit A thereto that are to be effective on the “Effective Date” shall become effective. With respect to any future contributions, the Effective Date shall be the date that such contributions are completed.

“Effective Price” as defined in the Contribution Agreement.

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Excess LLC Units” means any LLC Units held by a Non-Managing Member to the extent that, if such LLC Units were exchanged for the REIT Shares Amount pursuant to Section 8.6 hereof, such Non-Managing Member would Beneficially Own or Constructively Own REIT Shares in excess of the Ownership Limit or otherwise in violation of the Charter.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Existing Indebtedness” has the meaning set forth in Section 7.3.E(3).

“Fiscal Year” means the fiscal year of the Company, which shall be the calendar year.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such entity as may be in general use by significant segments of the United States accounting profession, which are applicable to the facts and circumstances on the date of determination.

“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

(a)The initial Gross Asset Value of any asset contributed by a Member to the Company shall be its fair market value, as agreed to by such Member and the Managing Member, and set forth on Exhibit A with respect to that Member; provided, however, that the initial Gross Asset Value of any asset contributed by the Managing Member or an Affiliate of Managing Member to the Company shall be its fair market value as reasonably and in good faith determined by the Managing Member.

(b)The Gross Asset Values of all Company assets immediately prior to the occurrence of any event described in clause (i), clause (ii), clause (iii), or clause (iv) hereof shall be adjusted to equal their respective gross fair market values, as determined by the Managing Member using such reasonable and good faith method of valuation as it may adopt, as of the following times:

(i)the acquisition of an additional interest in the Company (other than in connection with the execution of this Agreement but including, without limitation, acquisitions pursuant to Section 4.2 hereof or contributions or deemed contributions by the Managing Member pursuant to Section 4.4 hereof) by a new or existing Member in exchange for more than a de minimis Capital Contribution, if the Managing Member reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company;

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(ii)the distribution by the Company to a Member of more than a de minimis amount of Company property as consideration for an interest in the Company, if the Managing Member reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company;

(iii)the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); and

(iv)at such other times as the Managing Member shall reasonably determine necessary or advisable in order to comply with Regulations Sections 1.704-1(b) and 1.704-2.

(c)The Gross Asset Value of any Company asset distributed to a Member shall be the gross fair market value of such asset on the date of distribution as determined by the distributee and the Managing Member, provided that, if the distributee is the Managing Member or if the distributee and the Managing Member cannot agree on such a determination, such gross fair market value shall be determined by Appraisal.

(d)At the election of the Managing Member, the Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall not be adjusted pursuant to this subsection (d) to the extent that the Managing Member reasonably determines that an adjustment pursuant to subsection (b) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subsection (d).

(e)If the Gross Asset Value of a Company asset has been determined or adjusted pursuant to subsection (a), subsection (b) or subsection (d) above, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Income and Net Loss.

“Guarantee Opportunity” has the meaning set forth in Section 7.3.E(4).

“Holdback Amount” has the meaning set forth in the Contribution Agreement.

“Incapacity” or “Incapacitated” means, (i) as to any Member who is an individual, death, total physical disability or entry by a court of competent jurisdiction adjudicating such Member incompetent to manage his or her person or his or her estate; (ii) as to any Member that is a corporation or limited liability company, the filing of a certificate of dissolution, or its equivalent, for the corporation or limited liability company or the revocation of its charter; (iii) as to any Member that is a partnership, the dissolution and commencement of winding up of the partnership; (iv) as to any Member that is an estate, the distribution by the fiduciary of the estate’s entire interest in the Company; (v) as to any trustee of a trust that is a Member, the termination of the trust (but not the substitution of a new trustee); or (vi) as to any Member, the bankruptcy of such Member. For purposes of this definition, bankruptcy of a Member shall be deemed to have occurred when (a) the Member commences a voluntary

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proceeding seeking liquidation, reorganization or other relief of or against such Member under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Member is adjudged as bankrupt or insolvent, or a final and non-appealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Member, (c) the Member executes and delivers a general assignment for the benefit of the Member’s creditors, (d) the Member files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Member in any proceeding of the nature described in clause (b) above, (e) the Member seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Member or for all or any substantial part of the Member’s properties, (f) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within 120 days after the commencement thereof, (g) the appointment without the Member’s consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within 90 days of such appointment, or (h) an appointment referred to in clause (g) above is not vacated within 90 days after the expiration of any such stay.

“Indemnitee” means (i) any Person made a party to a proceeding by reason of its status as (a) a Non-Managing Member or Non-Managing Member Representative, (b) the Managing Member or (c) a director of the Managing Member or an officer or employee of the Company or the Managing Member and (ii) such other Persons (including Affiliates of the Managing Member or the Company) as the Managing Member may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion.

“Initial Non-Managing Members” means the Non-Managing Members (or successors in interest thereof) who acquired their Non-Managing Member Units in exchange for the Contributed Properties on the Effective Date, but excluding Managing Member to the extent of any “Tendered Non-Managing Member Units” (as defined in the Contribution Agreement) redeemed by the Company and acquired by Managing Member on the Effective Date.

“IRS” means the Internal Revenue Service, which administers the internal revenue laws of the United States.

“Joinder Agreement” means a Joinder Agreement in substantially the form attached hereto as Exhibit C.

“Liquidating Event” has the meaning set forth in Section 13.1 hereof.

“Liquidator” has the meaning set forth in Section 13.3.A hereof.

“LLC Distribution Date” means the date established by the Managing Member for the payment of actual distributions declared by the Managing Member pursuant to Sections 5.1 and 5.2, which date shall be the same as the date established by the Managing Member for the payment of dividends to holders of REIT Shares.

“LLC Record Date” means the record date established by the Managing Member for the distribution of Available Cash pursuant to Section 5.1 hereof, which record date shall be

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the same as the record date established by the Managing Member for a dividend to holders of REIT Shares.

“LLC Units” means the Managing Member Units and the Non-Managing Member Units, collectively.

“Loan-to-Value Ratio” shall mean the ratio, as of the date of incurrence of any Debt incurred by the Company, in which the numerator is equal to the outstanding principal balance of all Debt of the Company and the denominator is equal to the fair market value of the Contributed Properties and Successor Properties, as reasonably and in good faith determined by the Managing Member.

“Majority in Interest of the Non-Managing Members” means at any time those Non-Managing Members (other than the Managing Member in its capacity as a holder of Non-Managing Member Units) holding in the aggregate more than 50% of the then aggregate outstanding Non-Managing Member Units (other than those held by the Managing Member).

“Majority of Remaining Members” means Non-Managing Members owning a majority of the Non-Managing Member Units held by Non-Managing Members.

“Make-Whole Payment” has the meaning set forth in Section 7.3.G hereof.

“Managing Member” means Health Care Property Investors, Inc., a Maryland corporation, in its capacity as a Managing Member, or any successor Managing Member designated pursuant to the terms of this Agreement.

“Managing Member Guarantee” has the meaning set forth in Section 11.2.A.

“Managing Member Shortfall” has the meaning set forth in Section 5.1.A(2).

“Managing Member Unit” means a single unit of Membership Interest of the Managing Member issued pursuant to Article 4 hereof, as the same may be modified from time to time as provided in this Agreement. The ownership of Managing Member Units may (but need not in the sole and absolute discretion of the Managing Member) be evidenced in the form of a certificate for Managing Member Units.

“Member Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i) with respect to “partner nonrecourse debt minimum gain.”

“Member Nonrecourse Debt” has the meaning set forth in Regulations Section 1.704-2(b)(4) for the phrase “partner nonrecourse debt.”

“Member Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704-2(i)(2) for the phrase “partner nonrecourse deductions,” and the amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2).

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“Members” means the Persons owning Membership Interests, including the Managing Member, Non-Managing Members and any Additional and Substitute Members, named as Members in Exhibit A attached hereto, which Exhibit A may be amended from time to time.

“Membership Interest” means an ownership interest in the Company representing a Capital Contribution by a Member and includes any and all benefits to which the holder of such Membership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Membership Interest may be expressed as a number of Managing Member Units or Non-Managing Member Units, as applicable.

“Net Income” or “Net Loss” means, for each Fiscal Year of the Company, an amount equal to the Company’s taxable income or loss for such year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

(a)Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Income (or Net Loss) pursuant to this definition of “Net Income” or “Net Loss” shall be added to (or subtracted from, as the case may be) such taxable income (or loss);

(b)Any expenditure of the Company described in Code Section 705(a)(2)(b) or treated as a Code Section 705(a)(2)(b) expenditure pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income (or Net Loss) pursuant to this definition of “Net Income” or “Net Loss,” shall be subtracted from (or added to, as the case may be) such taxable income (or loss);

(c)In the event that the Gross Asset Value of any Company asset is adjusted pursuant to subsection (b) or subsection (c) of the definition of “Gross Asset Value,” the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Loss;

(d)In lieu of the depreciation, amortization and other cost recovery deductions that would otherwise be taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year;

(e)To the extent that an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member’s interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Income or Net Loss; and

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(f)Notwithstanding any other provision of this definition of “Net Income” or “Net Loss,” any item allocated pursuant to Section 6.3.A hereof shall not be taken into account in computing Net Income or Net Loss. The amounts of the items of Company income, gain, loss or deduction available to be allocated pursuant to Section 6.3.A hereof shall be determined by applying rules analogous to those set forth in this definition of “Net Income” or “Net Loss.”

“NMM Sharing Amount” means, with respect to any taxable disposition of a Contributed Property or Successor Property, the product equal to (a) the Sharing Amount multiplied by (b) the NMM Sharing Percentage.

“NMM Sharing Percentage” means a percentage equal to 1% multiplied by a fraction with the numerator equal to the number of Non-Managing Member Units then outstanding and the denominator equal to the number of Non-Managing Member Units issued by the Company to all Non-Managing Members; provided, however, any NMM Units reduced pursuant to Section 5.6.C hereof shall be subtracted from the denominator of such fraction.

“Non-Managing Member” means any Member other than the Managing Member (except to the extent the Managing Member holds Non-Managing Member Units).

“Non-Managing Member Representative” means William P. Gallaher until a successor Non-Managing Member Representative shall have been appointed pursuant to Section 15.13 hereof and, thereafter, shall mean the person appointed and then acting as the Non-Managing Member Representative hereunder.

“Non-Managing Member Unit” means a single unit of Membership Interest issued to a Non-Managing Member pursuant to Section 4.1 hereof, as the same may be modified from time to time as provided in this Agreement. The ownership of Non-Managing Member Units shall be evidenced in the form of a certificate for Non-Managing Member Units.

“Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(c).

“Nonrecourse Liability” has the meaning set forth in Regulations Section 1.752-1(a)(2).

“Notice of Redemption” means the Notice of Redemption substantially in the form of Exhibit B attached to this Agreement.

“Oakmont” has the meaning set forth in Recital A hereof.

 “One Hundred Member Limit” has the meaning set forth in Section 11.6.E hereof.

“Ownership Limit” means 9.8% of the number or value (whichever is more restrictive) of outstanding REIT Shares. The number and value of REIT Shares shall be determined by the Board of Directors of the Managing Member, in good faith, which determination shall be conclusive for all purposes hereof.

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“Payment Quarter” has the meaning set forth in Section 5.1.A hereof.

“Percentage Interest” means, as to a Member holding a Membership Interest, its interest in the Company as determined by dividing the LLC Units owned by such Member by the total number of LLC Units then outstanding as specified in Exhibit A attached hereto, as it may be modified or supplemented from time to time.

“Permitted Non-Managing Member Assignment” has the meaning set forth in Section 11.3.A hereof.

“Person” means an individual or a corporation, partnership, trust, unincorporated organization, association, limited liability company or other entity.

“Preferred Return Per Unit” means with respect to each Non-Managing Member Unit outstanding on a LLC Record Date an amount initially equal to zero, and increased cumulatively on each LLC Record Date by an amount equal to the product of (i) the cash dividend per REIT Share declared by the Managing Member for holders of REIT Shares on that LLC Record Date, multiplied by (ii) the Adjustment Factor in effect on that LLC Record Date; provided, however, that the increase that shall occur in accordance with the foregoing on the first LLC Record Date subsequent to the Effective Date shall be the foregoing product of (i) and (ii) above multiplied by a fraction, the numerator of which shall be the number of days in the period commencing on the Effective Date and ending on the first LLC Record Date following the Effective Date, and the denominator of which shall be the number of days in the period commencing on May 5, 2005 and ending on the first LLC Record Date following the Effective Date.

“Preferred Return Shortfall” means, for any holder of Non-Managing Member Units, the amount (if any) by which (i) the Preferred Return Per Unit with respect to all Non-Managing Member Units held by such holder exceeds (ii) the aggregate amount previously distributed with respect to such Non-Managing Member Units pursuant to Section 5.1.A(1) Section 5.6.A(1) or Section 5.6.B(1) hereof, together with cumulative simple interest accruing thereon at the Prime Rate from the applicable LLC Distribution Date to the date of distribution.

“Preferred Return Shortfall Per Unit” means, for any holder of Non-Managing Member Units, the amount equal to the quotient of (a) such Non-Managing Member’s Preferred Return Shortfall divided by (b) the number of Non-Managing Member Units held by such Non-Managing Member immediately prior to the day on which such Non-Managing Member delivers a Notice of Redemption pursuant to Section 8.6 hereof or Managing Member delivers a Call Notice pursuant to Section 13.2 hereof.

“Prime Rate” means on any date, a rate equal to the annual rate on such date announced by the Bank of New York to be its prime, base or reference rate for 90-day unsecured loans to its corporate borrowers of the highest credit standing but in no event greater than the maximum rate then permitted under applicable law. If the Bank of New York discontinues its use of such prime, base or reference rate or ceases to exist, the Managing Member shall designate the prime, base or reference rate of another state or federally chartered bank based in

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New York to be used for the purpose of calculating the Prime Rate hereunder (which rate shall be subject to limitation by all applicable usury laws).

“Profit Participation Amount” means with respect to any Member the sum of (a) cumulative distributions to such Member (including its predecessors, if any) pursuant to Section 5.6.A(2) to the extent such distributions did not result in a reduction in LLC Units pursuant to Section 5.6.C; and (b) the remaining amount of the cumulative distributions to such Member (including its predecessors, if any) pursuant to Section 5.6.A(2) multiplied by a fraction, the numerator of which is the excess (if any) of (i) the weighted average of the Values on each of the Reduction Dates over (ii) the Effective Price, and the denominator of which is the weighted average of the Values on each of the Reduction Dates. Exhibit D sets forth an example of the calculation of Profit Participation Amount.

“Properties” means any assets and property of the Company such as, but not limited to, interests in real property (including the Contributed Properties and Successor Properties) and personal property, including, without limitation, fee interests, interests in ground leases, interests in limited liability companies, joint ventures or partnerships, interests in mortgages, and Debt instruments as the Company may hold from time to time.

“Property Appreciation” means, with respect to a taxable disposition of a Contributed Property or Successor Property, the excess of the sales price paid in such disposition (including amounts paid through the assumption of debt) over the initial Gross Asset Value of such Contributed Property (or if the disposition was of a Successor Property, the initial Gross Asset Value of the related Contributed Property to the extent it relates to the Successor Property).

“Redemption” has the meaning set forth in Section 8.6.A hereof.

“Redemption Right” has the meaning set forth in Section 8.6.A hereof.

“Reduction” has the meaning set forth in Section 5.6.C hereof.

“Reduction Date” has the meaning set forth in Section 5.6.C hereof.

“Reduction Units” has the meaning set forth in Section 5.6.C hereof.

“Refinancing Debt” means any Debt (other than indebtedness to the Managing Member or any Affiliate of the Managing Member), the repayment of which is secured by all or any portion of the Properties.

“Refinancing Debt Proceeds” means the net proceeds from any Refinancing Debt incurred by the Company which remain after the repayment of any Debt with proceeds of the Refinancing Debt and the payment of all costs related to the Refinancing Debt.

“Registration Rights Agreement” with respect to each Initial Non-Managing Member, a Registration Rights Agreement in substantially the form of Exhibit F to the Contribution Agreement to be entered into between such Initial Managing Member and Managing Member concurrent with the Effective Date.

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“Regulations” means the applicable income tax regulations under the Code, whether such regulations are in proposed, temporary or final form, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

“Regulatory Allocations” has the meaning set forth in Section 6.3.A(7) hereof.

“REIT” means a real estate investment trust qualifying under Code Section 856, et seq.

“REIT Member” means a Member or Assignee that is, or has made an election to qualify as, a REIT.

“REIT Requirements” has the meaning set forth in Section 5.1.B hereof.

“REIT Share” means a share of the Common Stock of the Managing Member, par value $1.00 per share.

“REIT Shares Amount” means a number of REIT Shares equal to the sum of (a) the product of (i) the number of Tendered Units and (ii) the Adjustment Factor plus (b) the quotient of (i) the product of (x) the number of Tendered Units and (y) Preferred Return Shortfall Per Unit divided by (ii) the Value of a REIT Share as of the applicable Valuation Date.

“Related Party” means, with respect to any Person, any other Person whose actual ownership, Beneficial Ownership or Constructive Ownership of shares of the Managing Member’s capital stock would be attributed to the first such Person under either (i) Code Section 544 (as modified by Code Section 856(h)(1)(b) ) or (ii) Code Section 318 (as modified by Code Section 856(d)(5)).

“Replacement Indebtedness” has the meaning set forth in Section 7.3.E(3) hereof.

“Rights” means rights, options, warrants or convertible or exchangeable securities entitling the Managing Member’s shareholders to subscribe for or purchase REIT Shares, or any other securities or property.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Sharing Amount” means, with respect to any taxable disposition of a Contributed Property or Successor Property, the excess, if any, of the Aggregate Sharing Amount over the Sharing Amounts, if any, previously used for purposes of calculating Reduction Units pursuant to Section 5.6.C.

“Sharing Percentage” means, with respect to a Non-Managing Member (including the Managing Member with respect to any Non-Managing Member Units held by the Managing Member) or Assignee, its share of the NMM Sharing Percentage based on its share of

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the Non-Managing Member Units and, with respect to the Managing Member (in its capacity as the Managing Member), one hundred percent (100%) minus the NMM Sharing Percentage.

“Specified Redemption Date” means (A) in the case of a Redemption pursuant to Section 8.6.A hereof and subject to the terms thereof, the twentieth (20^th) calendar day (or, if such day is not a Business Day, the next following Business Day) after the receipt by the Managing Member of a Notice of Redemption; provided, however, that notwithstanding any provisions set forth herein to the contrary, in no event shall the Specified Redemption Date with respect to any LLC Unit occur prior to the first (1^st) anniversary of the Effective Date; provided, further, that the Specified Redemption Date, as well as the closing of a Redemption on any Specified Redemption Date, may be deferred, in the Managing Member’s sole and absolute discretion, for such time (but in any event not more than 90 days in the aggregate) as may reasonably be required to effect, as applicable, (i) necessary funding arrangements, (ii) compliance with the Securities Act or other law (including, but not limited to, (a) state “blue sky” or other securities laws and (b) the expiration or termination of the applicable working period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended), and (iii) satisfaction or waiver of other commercially reasonable and customary closing conditions and requirements for a transaction of such nature, and (B) in the case of the delivery of a Call Notice pursuant to Section 13.2, the tenth (10^th) calendar day (or, if such day is not a Business Day, the next following Business Day) after the mailing to the applicable Non-Managing Members of a Call Notice.

“Subsequent Threshold Test” means a test which will be satisfied on the date on which eighty percent (80%) of the LLC Units issued by the Company to the Initial Non-Managing Members have been disposed of pursuant to a Taxable Disposition or Series of Taxable Dispositions.

“Subsidiary” means, with respect to any Person other than the Company, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person; provided, however, that, with respect to the Company, “Subsidiary” means solely a partnership or limited liability company (taxed, for federal income tax purposes, as a partnership or disregarded entity and not as an association or publicly traded partnership taxable as a corporation) of which the Company is a partner or member unless the Managing Member has received an unqualified opinion from independent counsel of recognized standing, or a ruling from the IRS, that the ownership of shares of stock of a corporation or other entity will not jeopardize the Managing Member’s status as a REIT, in which event the term “Subsidiary” shall include the corporation or other entity which is the subject of such opinion or ruling.

“Substituted Member” means an Assignee who is admitted as a Member to the Company pursuant to Section 11.4 hereof. The term “Substituted Member” shall not include any Additional Member.

“Successor Properties” means real properties acquired by the Company in connection with a Tax-Free Disposition of any Contributed Property or Successor Property (each, a “Successor Property”).

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“Taxable Dispositions” means a transaction in which an LLC Unit has either (a) been disposed of to the extent such disposition is a taxable transaction (including, without limitation, a Redemption or exchange pursuant to Section 8.6.A hereof) or (b) otherwise received a “step-up” in tax basis to its Fair Market Value at the time of such “step-up” (e.g., as a result of the death of a holder of LLC Units who is an individual).

“Tax-Free Disposition” means the disposition of property in a transaction that is not subject to tax under the Code, including, without limitation, by virtue of the provisions of Section 1031 of the Code.

“Tax Items” has the meaning set forth in Section 6.1 hereof.

“Tax Protection Period” means the period of time beginning on the Effective Date and ending on the first to occur of (i) the tenth (10^th) anniversary of the Effective Date or (ii) the date on which the Subsequent Threshold Test has been satisfied.

“Tendered Units” has the meaning set forth in Section 8.6.A hereof.

“Tendering Party” has the meaning set forth in Section 8.6.A hereof.

“Termination Transaction” has the meaning set forth in Section 11.2.B hereof.

“Terminating Capital Transaction” means any sale or other disposition of all or substantially all of the assets of the Company or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Company.

“Total Required Debt Amount” means Thirty One Million Dollars ($31,000,000.00).

“Transfer,” when used with respect to an LLC Unit or all or any portion of a Membership Interest, means any sale, assignment, bequest, conveyance, devise, gift (outright or in trust), pledge, encumbrance, hypothecation, mortgage, exchange, transfer or other disposition or act of alienation, whether voluntary or involuntary or by operation of law. The terms “Transferred” and “Transferring” have correlative meanings.

“Triggering Event” has the meaning set forth in Section 7.3.G hereof.

“Unit Amount” means, with respect to a taxable disposition of a Contributed Property or Successor Property, a number of LLC Units equal to the product of (i) the number of LLC Units outstanding at the time of such disposition, and (ii) the Unit Portion.

“Unit Appreciation” means, with respect to any taxable disposition of a Contributed Property or Successor Property, the product of the (i) Unit Amount and (ii) excess of the Value at the time of such disposition over the Effective Price.

“Unit Portion” means, with respect to a taxable disposition of a Contributed Property or Successor Property, a number determined by dividing (i) the net cash flow (ignoring

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payments made by the Company under any Debt related to such Property) produced by such Contributed Property or Successor Property for the twelve month period immediately prior to such disposition, by (ii) the net cash flow (ignoring payments made by the Company under any Debt related to all Contributed Properties or Successor Properties) produced by all Contributed Properties or Successor Properties held by the Company for the twelve month period immediately prior to such disposition.

“Valuation Date” means (a) in the case of a tender of LLC Units for Redemption, the date of the receipt by the Managing Member of the Notice of Redemption with respect to those LLC Units or, if such date is not a Business Day, the immediately preceding Business Day or (b) for purposes of Section 5.6.C hereof, the Reduction Date or, if the Reduction Date is not a Business Day, the immediately preceding Business Day, (c) for purposes of Section 13.2 the date the Call Notice is delivered or, if such day is not a Business Day, the immediately preceding Business Day, or (d) in any other case, the date specified in this Agreement or, if such date is not a Business Day, the immediately preceding Business Day.

“Value” means, on any Valuation Date, the average of the Closing Prices for the twenty (20) consecutive trading days ending on the second trading day immediately prior to the Valuation Date.

“Welfare Structure” has the meaning set forth in Section 7.1.A(25) hereof

ARTICLE II.
ORGANIZATIONAL MATTERS

2.1Formation

The Company is a limited liability company formed pursuant to the provisions of the Act for the purposes stated in Section 3.1 and upon the terms and subject to the conditions set forth in this Agreement. Except as expressly provided herein, the rights and obligations of the Members and the administration and termination of the Company shall be governed by the Act.

2.2Name

The name of the Company is HCP DR CALIFORNIA, LLC. The Company’s business may be conducted under any other name or names deemed advisable by the Managing Member, including the name of the Managing Member or any Affiliate thereof. The Managing Member in its sole and absolute discretion may change the name of the Company at any time and from time to time in accordance with applicable law and shall notify the Members of such change in the next regular communication to the Members.

2.3Registered Office and Agent; Principal Place of Business; Other Places of Business

The address of the registered office of the Company in the State of Delaware is located at c/o Corporation Service Company, 2711 Centerville, Suite 400, Newcastle County, Wilmington, Delaware 19808, and the registered agent for service of process on the Company in the State of Delaware at such registered office is Corporation Service Company, 2711

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Centerville, Suite 400, Newcastle County, Wilmington, Delaware 19808. The principal office of the Company is located at 3760 Kilroy Airport Way, Suite 300, Long Beach, California 90806, or such other place as the Managing Member may from time to time designate by notice to the Members. The Company may maintain offices at such other place or places within or outside the State of Delaware as the Managing Member deems advisable.

2.4Power of Attorney

A.Each Member (other than the Managing Member) and each Assignee hereby irrevocably constitutes and appoints the Managing Member, any Liquidator, and authorized officers and attorneys in fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to: 

(1)execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the Managing Member or any Liquidator deems appropriate or necessary to form, qualify or continue the existence or qualification of the Company as a limited liability company in the State of Delaware and in all other jurisdictions in which the Company may conduct business or own property; (b) all instruments that the Managing Member or any Liquidator deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents that the Managing Member or any Liquidator deems appropriate or necessary to reflect the dissolution and liquidation of the Company pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; (d) all instruments relating to the admission, withdrawal, removal or substitution of any Member pursuant to, or other events described in, Articles 11, 12 or 13 hereof or the Capital Contribution of any Member; and (e) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of Membership Interests; and

(2)execute, swear to, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole and absolute discretion of the Managing Member or any Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Members hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole discretion of the Managing Member or any Liquidator, to effectuate the terms or intent of this Agreement.

Nothing contained in this Section 2.4 shall be construed as authorizing the Managing Member or any Liquidator to amend this Agreement except in accordance with Article 14 hereof or as may be otherwise expressly provided for in this Agreement.

B.The foregoing power of attorney is hereby declared to be irrevocable and a special power coupled with an interest, in recognition of the fact that each of the Members and Assignees will be relying upon the power of the Managing Member to act as contemplated by

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this Agreement, and it shall survive and not be affected by the subsequent Incapacity of any Member or Assignee and the Transfer of all or any portion of such Member’s or Assignee’s LLC Units or Membership Interest and shall extend to such Member’s or Assignee’s heirs, successors, assigns and personal representatives. Each such Member or Assignee hereby agrees to be bound by any representation made by the Managing Member or any Liquidator, acting in good faith pursuant to such power of attorney; and each such Member or Assignee hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the Managing Member or any Liquidator, taken in good faith under such power of attorney. Each Member or Assignee shall execute and deliver to the Managing Member or any Liquidator, within 15 days after receipt of the Managing Member’s or Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the Managing Member or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Company.

2.5Term

The term of the Company commenced on July 6, 2005, the date that the original Certificate was filed in the office of the Secretary of State of Delaware in accordance with the Act, and shall continue until terminated pursuant the provisions of Article 13 hereof or as otherwise provided by law.

ARTICLE III.
PURPOSE

3.1Purpose and Business

The sole purposes of the Company are (i) to acquire, own, manage, operate, repair, renovate, maintain, improve, expand, redevelop, encumber, sell, lease, hold for appreciation, or otherwise dispose of, in accordance with the terms of this Agreement, the Properties and any other Properties acquired by the Company, and to invest and ultimately distribute funds, including, without limitation, funds obtained from owning or otherwise operating the Properties and any other Properties acquired by the Company and the proceeds from the sale or other disposition of the Properties and any other Properties acquired by the Company, all in the manner permitted by this Agreement, and (ii) subject to and in accordance with the terms of this Agreement, to do anything necessary or incidental to the foregoing.

3.2Powers

The Company is empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Company including, without limitation, full power and authority, directly or through its ownership interest in other entities, to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness, whether or not secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and develop real property, and lease, sell, transfer and dispose of real property; provided, however, that notwithstanding any other provision in this Agreement, but subject to Sections 7.3.E, 7.3.F, and 7.3.G, the Managing

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Member may cause the Company to take any action to avoid a result that, or refrain from taking any action that, in the reasonable judgment of the Managing Member, (i) could adversely affect the ability of the Managing Member to continue to qualify as a REIT, (ii) could subject the Managing Member to any additional taxes under Code Section 857 or Code Section 4981, or (iii) could violate any law or regulation of any governmental body or agency having jurisdiction over the Managing Member, its securities or the Company, unless such action (or inaction) under clause (i), clause (ii) or clause (iii) above shall have been specifically consented to by the Managing Member in writing.

3.3Specified Purposes

The Company shall be a limited liability company only for the purposes specified in Section 3.1 hereof, and this Agreement shall not be deemed to create a company, venture or partnership between or among the Members with respect to any activities whatsoever other than the activities within the purposes of the Company as specified in Section 3.1 hereof. Except as otherwise provided in this Agreement, no Member shall have any authority to act for, bind, commit or assume any obligation or responsibility on behalf of the Company, its properties or any other Member. No Member, in its capacity as a Member under this Agreement, shall be responsible or liable for any indebtedness or obligation of another Member, nor shall the Company be responsible or liable for any indebtedness or obligation of any Member, incurred either before or after the execution and delivery of this Agreement by such Member, except as to those responsibilities, liabilities, indebtedness or obligations incurred pursuant to and as limited by the terms of this Agreement and the Act.

3.4Representations and Warranties by the Members; Disclaimer of Certain Representations

A.Each Member that is an individual (including, without limitation, each Additional Member or Substituted Member as a condition to becoming an Additional Member or a Substituted Member) represents and warrants to the Company, the Managing Member and each other Member that (i) such Member has the legal capacity to enter into this Agreement and perform such Member’s obligations hereunder, (ii) the consummation of the transactions contemplated by this Agreement to be performed by such Member will not result in a breach or violation of, or a default under, any material agreement by which such Member or any of such Member’s property is bound, or any statute, regulation, order or other law to which such Member is subject, (iii) such Member is neither a “foreign person” within the meaning of Code Section 1445(f) nor a “foreign partner” within the meaning of Code Section 1446(e), and (iv) this Agreement is binding upon, and enforceable against, such Member in accordance with its terms.

B.Each Member that is not an individual (including, without limitation, each Additional Member or Substituted Member as a condition to becoming an Additional Member or a Substituted Member) represents and warrants to the Company, the Managing Member and each other Member that (i) all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including, without limitation, that of its managing member(s) (or, if there is no managing member, a majority in interest of all members), committee(s), trustee(s), general partner(s), beneficiaries, directors and shareholder(s), as the

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case may be, as required, (ii) the consummation of such transactions will not result in a breach or violation of, or a default under, its partnership or operating agreement, trust agreement, charter or bylaws, as the case may be, any material agreement by which such Member or any of such Member’s properties or any of its partners, members, beneficiaries, trustees or shareholders, as the case may be, is or are bound, or any statute, regulation, order or other law to which such Member or any of its partners, members, trustees, beneficiaries or shareholders, as the case may be, is or are subject, (iii) such Member is neither a “foreign person” within the meaning of Code Section 1445(f) nor a “foreign partner” within the meaning of Code Section 1446(e), and (iv) this Agreement is binding upon, and enforceable against, such Member in accordance with its terms.

C.Each Member (including, without limitation, each Additional Member or Substituted Member as a condition to becoming an Additional Member or a Substituted Member) represents, warrants and agrees that it has acquired and continues to hold its interest in the Company for its own account for investment only and not for the purpose of, or with a view toward, the resale or distribution of all or any part thereof, nor with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances. Each Member further represents and warrants that it is an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act and is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, particularly real estate investments, and that it has a sufficiently high net worth that it does not anticipate a need for the funds that it has invested in the Company in what it understands to be a highly speculative and illiquid investment.

D.The representations and warranties contained in Sections 3.4.A, 3.4.B and 3.4.C hereof shall survive the execution and delivery of this Agreement by each Member (and, in the case of an Additional Member or a Substituted Member, the admission of such Additional Member or Substituted Member as a Member in the Company) and the dissolution, liquidation and termination of the Company.

E.Each Member (including, without limitation, each Additional Member or Substituted Member as a condition to becoming an Additional Member or a Substituted Member) hereby represents that it has consulted and been advised by its legal counsel and tax advisor in connection with, and acknowledges that no representations as to potential profit, tax consequences of any sort (including, without limitation, the tax consequences resulting from forming or operating the Company, conducting the business of the Company, executing this Agreement, consummating the transaction provided for in or contemplated by the Contribution Agreement, making a Capital Contribution, being admitted to the Company, receiving or not receiving distributions from the Company, exchanging LLC Units or being allocated Tax Items), cash flows, funds from operations or yield, if any, in respect of the Company or the Managing Member have been made by the Company, any Member or any employee or representative or Affiliate of the Company or any Member, and that projections and any other information, including, without limitation, financial and descriptive information and documentation, that may have been in any manner submitted to such Member shall not constitute any representation or warranty of any kind or nature, express or implied.

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ARTICLE IV.
CAPITAL CONTRIBUTIONS

4.1Capital Contributions of the Initial Members

At the time of their respective execution of this Agreement, the Members (or, in the event a Member shall be one of a Contributor’s Members, the Contributor) shall make Capital Contributions as set forth in Exhibit A to this Agreement. The Members (including, without limitation, each of Contributor’s Members, if applicable) shall own Managing Member Units and Non-Managing Member Units, as applicable, in the amounts set forth on Exhibit A; provided, however, that it is acknowledged that any “Tendered Non-Managing Member Units” (as defined in the Contribution Agreement) redeemed by the Company and acquired by Managing Member in accordance with the terms of the Contribution Agreement shall be owned by Managing Member and reflected on Exhibit A. Except as required by law or as otherwise provided in Sections 4.1, 4.2 and 4.4, no Member shall be required or permitted to make any additional Capital Contributions or loans to the Company.

4.2Additional Members

The Managing Member is authorized to admit one or more Additional Members to the Company from time to time, in accordance with the provisions of Section 12.3 hereof, on terms and conditions and for such Capital Contributions as may be established by the Managing Member in its reasonable discretion except as provided in Section 12.3. The provisions of Section 12.3 shall govern the acquisition by the Company in the future of additional Properties by means of Capital Contributions by other Persons, which Capital Contributions shall be set forth in Exhibit A. As a condition to being admitted to the Company, each Additional Member shall execute a Joinder Agreement.

4.3Loans and Incurrence and Payment of Debt

A.Subject to the provisions of Sections 4.4, 7.3.E(3) and 7.3.E.(4) hereof, the Company may incur or assume Debt, or enter into other similar credit, guarantee, financing (including, without limitation, the encumbrance of the Properties for the debt of Affiliates of HCP pursuant to so-called cross-collateralized loans, or otherwise) or refinancing arrangements, repay or prepay Debt, for any purpose (including, without limitation, in connection with any further acquisition of Properties from any Person), upon such terms as the Managing Member determines appropriate; provided, however, that any Debt shall be nonrecourse to the Managing Member unless the Managing Member otherwise agrees; provided, further, that except as otherwise required for the Managing Member in order to avoid an obligation to make a Make-Whole Payment pursuant to Sections 7.3.E(3) or 7.3.E(4), at the time of incurrence of any such Debt, the Loan-to-Value Ratio shall not exceed Sixty-Five Percent (65%).

B.Without limiting the foregoing, subject to the provisions of Section 7.3.E, the Managing Member is authorized, in its sole and absolute discretion, to cause the Company to repay or prepay any Debt.

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4.4Additional Funding and Capital Contributions

A.General. The Managing Member may, at any time and from time to time, determine that the Company requires additional funds (“Additional Funds”) for the operation of the Company. Additional Funds may be raised by the Company in accordance with the terms of Sections 4.2 or 4.3 hereof or pursuant to the terms of this Section 4.4; provided, however, that in no event shall any Non-Managing Member be required to make additional Capital Contributions.  No Person, including, without limitation, any Member or Assignee, shall have any preemptive, preferential, participation or similar right or rights to subscribe for or acquire any Membership Interest.

B.Additional Contributions. The Managing Member on behalf of the Company may raise all or any portion of the Additional Funds by making additional Capital Contributions. Subject to the definition of “Gross Asset Value,” the Managing Member shall determine in good faith the amount, terms and conditions of such additional Capital Contributions. The Managing Member shall receive that number of additional Managing Member Units in consideration for additional Capital Contributions made by the Managing Member that represents the same percentage of the total outstanding LLC Units (including the newly issued LLC Units) as the initial Gross Asset Value of the additional Capital Contribution (net of the amount of liabilities of the Managing Member assumed by the Company or that are secured by the property contributed to the Company) (or, in the event of a contribution of cash, the amount of cash so contributed) represents of the Gross Asset Value of the assets of the Company (including the additional Capital Contributions) as of the date of such contribution; provided, however, that Managing Member shall receive Managing Member Units (i.e., in addition to the initial Managing Member Units set forth on Exhibit A), equal to all cash Capital Contributions made by the Managing Member to fund any Holdback Amount payable by the Company under the Contribution Agreement equal to such cash Capital Contributions on account thereof divided by the Effective Price under the Contribution Agreement. In addition to the foregoing, Managing Member shall also be permitted to make additional Capital Contributions of cash or other property to the Company in accordance with the terms set forth herein for any lawful purpose.

C.Timing of Additional Capital Contributions. If additional Capital Contributions are made by a Member on any day other than the first (1^st) day of a Fiscal Year, then Net Income, Net Loss, each item thereof and all other items of income, gain, loss, deduction and credit allocable among Members for such Fiscal Year, if necessary, shall be allocated among such Members by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), using the “interim closing of the books” or “daily proration” method or another permissible method selected by the Managing Member.

4.5No Interest; No Return

Except as provided herein, no Member shall be entitled to interest on its Capital Contribution or on such Member’s Capital Account. Except as provided herein or by law, no Member shall have any right to demand or receive the return of its Capital Contribution from the Company.

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ARTICLE V.
DISTRIBUTIONS

5.1Requirement and Characterization of Distributions

A.Subject to the provisions of Sections 5.7 and 5.8 hereof, the Managing Member shall cause the Company to distribute quarterly on the LLC Distribution Date all Available Cash generated by the Company during the quarter most recently ended prior to the LLC Distribution Date (the “Payment Quarter”) as follows:

(1)First, to the holders of the Non-Managing Member Units, in accordance with their relative Preferred Return Shortfalls at the end of the Payment Quarter, until the Preferred Return Shortfall for each holder of Non-Managing Member Units at the end of the Payment Quarter is zero, provided, however, that in the event a Reduction Date occurs during any Payment Quarter, a distribution shall be made under this Section 5.1.A(1) on the LLC Distribution Date associated with such Payment Quarter to the holder or holders of the Reduction Units in an amount determined by multiplying the amount that would have been distributed on the LLC Distribution Date under Section 5.1.A(1) in respect of the Reduction Units had they been outstanding on the last day of such Payment Quarter by a fraction, the numerator of which shall be the number of days beginning on the first day of the Payment Quarter relating to the LLC Distribution Date and ending on the Reduction Date and the denominator of which shall be the number of days in the Payment Quarter in which the Reduction Date occurs.

(2)Second, to the Managing Member until the Managing Member has received an amount equal to the excess (the “Managing Member Shortfall”), if any, of (A) the amount of cash that must be distributed to the Managing Member such that aggregate distributions of cash pursuant to Sections 5.1.A(1), 5.1.A(2), 5.6.A(1) and 5.6.B(1) shall have been made to all Members pro rata to the Members’ Percentage Interests, over (B) the sum of all prior distributions to the Managing Member pursuant to this Section 5.1.A(2) and Sections 5.6.A(1) and 5.6.B(1).

(3)Thereafter, the Managing Member may, in its sole discretion, cause the Company to distribute all Available Cash remaining after the distributions provided for in Section 5.1.A(1) and 5.1.A.(2) above to the Members in proportion to their Sharing Percentages.

B.The Managing Member may take such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with its qualification as a REIT, to cause the Company to distribute sufficient amounts to enable the Managing Member to pay stockholder dividends that will (a) satisfy the requirements for qualifying as a REIT under the Code and Regulations (“REIT Requirements”), and (b) except to the extent the Managing Member elects, in its sole discretion, not to make such distributions, avoid any federal income or excise tax liability of the Managing Member.

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5.2Distributions in Kind

No right is given to any Member to demand and receive property other than cash. The Managing Member may determine, with the Consent of the Non-Managing Members, to make a distribution in kind to the Members of Company assets, and such assets shall be distributed in such a fashion as to ensure that the fair market value is distributed and allocated in accordance with Articles 5 and 6 hereof. The fair market value of any Property distributed in kind shall be determined (i) prior to the Subsequent Threshold Date, by the Managing Member with the Consent of the Non-Managing Members, and (ii) thereafter, by the Managing Member in its good faith determination.

5.3Amounts Withheld

Each Member hereby authorizes the Company to withhold from or pay on behalf of or with respect to such Member any amount of federal, state, local or foreign taxes that the Managing Member determines that the Company is required to withhold or pay with respect to any amount distributable or allocable to such Member pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Company pursuant to Code Section 1441, Code Section 1442, Code Section 1445 or Code Section 1446. Any amount paid on behalf of or with respect to a Member shall constitute a loan by the Company to such Member, which loan shall be repaid by such Member within 15 days after notice from the Managing Member that such payment must be made unless (i) the Company withholds such payment from a distribution that would otherwise be made to the Member or (ii) the Managing Member determines that such payment may be satisfied out of the Available Cash of the Company that would, but for such payment, be distributed to the Member. Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as having been distributed to such Member. Each Member hereby unconditionally and irrevocably grants to the Company a security interest in such Member’s Membership Interest to secure such Member’s obligation to pay to the Company any amounts required to be paid pursuant to this Section 5.3. In the event that a Member fails to pay any amounts owed to the Company pursuant to this Section 5.3 when due, the Managing Member may, in its sole and absolute discretion, elect to make the payment to the Company, either directly or through an Affiliate, on behalf of such defaulting Member, and in such event shall be deemed to have loaned such amount to such defaulting Member and shall succeed to all rights and remedies of the Company as against such defaulting Member (including, without limitation, the right to receive distributions). Any amounts payable by a Member hereunder shall bear interest at the base rate on corporate loans at large United States money center commercial banks, as published from time to time in the Wall Street Journal, plus four (4) percentage points (but not higher than the maximum lawful rate) from the date such amount is due (i.e., 15 days after demand) until such amount is paid in full. Each Member shall take such actions as the Company or the Managing Member shall request in order to perfect or enforce the security interest created hereunder.

5.4Distributions Upon Liquidation

Notwithstanding the other provisions of this Article 5, net proceeds from a Terminating Capital Transaction and any other cash received or reductions in reserves made after

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commencement of the liquidation of the Company shall be distributed to the Members in accordance with Section 13.3 hereof.

5.5Restricted Distributions

Notwithstanding any provision to the contrary contained in this Agreement, neither the Company nor the Managing Member, on behalf of the Company, shall make a distribution to any Member on account of its Membership Interest or interest in LLC Units if such distribution would violate Section 18-607 of the Act or other applicable law.

5.6Distributions of Proceeds from Sale of Properties and Refinancing Debt

A.Subject to the provisions of Sections 5.7 and 5.8 below, in the event of a taxable disposition of some, but not all, of the Properties, the Managing Member shall cause the Company to (i) reinvest (including by making loans pursuant to the terms of this Agreement) the Disposition Proceeds to the extent the Managing Member elects to do so and in the amount determined by the Managing Member to be appropriate (and to hold the Disposition Proceeds in an interest bearing account pending such reinvestment), in its sole discretion, and (ii) if the Managing Member elects, in its sole discretion, to distribute all or any portion of the Disposition Proceeds, distribute such portions of the Disposition Proceeds, to the extent thereof, as follows:

(1)First, to the holders of LLC Units in accordance with their Preferred Return Shortfalls until the Preferred Return Shortfall for each holder of Non-Managing Member Units is zero, and then to the Managing Member to the extent of its Managing Member Shortfall;

(2)Second, to the holders of LLC Units pro rata to their holdings of LLC Units but only to the extent that such distribution would not cause the number of LLC Units held by the Non-Managing Members to be reduced below zero pursuant to the provisions of Section 5.6.C hereof; and

(3)Third, the remaining balance of the Disposition Proceeds, if any, to the Managing Member.

B.Subject to the provisions of Section 5.7, upon the incurrence of Refinancing Debt, the Managing Member shall cause the Company to (i) reinvest (including by making loans pursuant to the terms of this Agreement) the Refinancing Debt Proceeds to the extent the Managing Member elects to do so and in the amount determined by the Managing Member to be appropriate (and to hold the Refinancing Debt Proceeds in an interest bearing account pending such reinvestment), in its sole discretion, and (ii) if the Managing Member elects, in its sole discretion,  to distribute all or any portion of the Refinancing Debt Proceeds, distribute such portion of the Refinancing Debt Proceeds, to the extent thereof, as follows:

(1)First, to the holders of the Non-Managing Member Units in accordance with their Preferred Return Shortfalls until the Preferred Return Shortfall for each holder of Non-Managing Member Units is zero and then to the Managing Member to the extent of its Managing Member Shortfall; and

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(2)Second, the remaining balance of the Refinancing Debt Proceeds, if any, to the Members in proportion to their Sharing Percentages.

C.The number of LLC Units outstanding on the date of a distribution pursuant to Section 5.6.A(2) hereof will be reduced (each such reduction a “Reduction”) by a number of LLC Units (rounded down to the nearest whole unit) (the “Reduction Units”) on the date of the distribution (the “Reduction Date”) by the aggregate number of LLC Units (the “Total Units”) as follows:

(1)The Non-Managing Member Units shall be reduced by a number of LLC Units (rounded down to the nearest whole unit) (the “Non-Managing Member Reduction Units”) determined by dividing (i) the excess of (a) the aggregate amount of distributions made on the Reduction Date to Non-Managing Members and Assignees pursuant to Sections 5.6.A(2) and 5.6.B(2), over (b) the NMM Sharing Amount by (ii) the product obtained by multiplying (a) Value on the Reduction Date by (b) the Adjustment Factor. The Non-Managing Member Reduction Units shall be allocated (as closely as practicable in whole units) among the holders of Non-Managing Member Units in accordance with their respective holdings of Non-Managing Member Units.

(2)The Managing Member Units shall be reduced by a number of Managing Member Units (by a number of LLC Units (rounded down to the nearest whole unit) (the “Managing Member Reduction Units”) equal to the product of (i) the Reduction Units with respect to the Non-Managing Members divided by the aggregate Percentage Interest of the Non-Managing Members immediately prior to the Reduction Date, times (ii) the Percentage Interest of the Managing Member immediately prior to such Reduction Date, provided the Managing Member Units shall not be reduced to less than 1 LLC Unit.

To reflect the foregoing reduction, each Member shall return to the Managing Member the certificate evidencing the Reduction Units allocated to him or it or the Managing Member Units so reduced which will be canceled and a new certificate evidencing the reduced number of Managing Member Units or Non-Managing Member Units shall be immediately issued to such Member by the Managing Member on behalf of the Company. In the event the number of outstanding Non-Managing Member Units held by a Non-Managing Member or Assignee is reduced (pursuant to this Section 5.6.C or otherwise) to zero, such Non-Managing Member or Assignee shall cease to have an interest in the Company (other than the right to receive final distributions and allocations resulting from the liquidation of their interest). Exhibit D sets forth an example of a Reduction in Non-Managing Member Units and Managing Member Units pursuant to this Section 5.6.C.

D.The Managing Member shall have no obligation to incur Refinancing Debt for the purpose of making distributions pursuant to this Section 5.6 or for any other purpose, except as provided in Sections 7.3.E(3) and 7.3.E(4).

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5.7Distributions Following Redemption

Notwithstanding anything to the contrary contained herein, a Non-Managing Member shall not be entitled to any distribution pursuant to this Article V with respect to any Tendered Units if the next LLC Record Date is on or after the Specified Exchange Date for such Tendered Unit(s).

5.8Offsets

Without in any way limiting any other right or remedy at law or otherwise, Managing Member shall be entitled to offset against any distribution payable to a Non-Managing Member pursuant to this Article V and Article XIII hereof any amounts owing or otherwise alleged to be owing to the Company or the Managing Member by (i) such Non-Managing Member, including, without limitation, pursuant to any applicable Registration Rights Agreement or (ii) by such Non-Managing Member’s Applicable Contributor on account of such Contributor’s Contribution Liability. Any amounts so offset pursuant to the foregoing shall be deemed for all purposes to have been distributed or paid to such Non-Managing Member as required by this Agreement.

5.9Special Managing Member Distribution Calculation

Notwithstanding anything to the contrary in this Agreement, for purposes of determining the Managing Member Shortfall distributions payable to the Managing Member pursuant to Sections 5.1A(2), 5.6A(1) and 5.6B(1) as of any LLC Distribution Date pursuant to Section 5.1 or as of the date of distribution of any Disposition Proceeds or Refinancing Proceeds pursuant to Section 5.6, the Managing Member shall be treated as holding that number of Managing Member Units equal to the product of (x) the total number of Managing Member Units held by the Managing Member as of such date, times (y) 1.20.

ARTICLE VI.
ALLOCATIONS

6.1Timing and Amount of Allocations of Net Income and Net Loss

Net Income and Net Loss of the Company shall be determined and allocated with respect to each Fiscal Year of the Company as of the end of each such year. Except as otherwise provided in this Article 6, an allocation to a Member of a share of Net Income or Net Loss shall be treated as an allocation of the same share of each item of income, gain, loss or deduction (collectively, “Tax Items”)that is taken into account in computing Net Income or Net Loss.

6.2General Allocations

A.Operating Net Income and Net Loss. Except as otherwise provided in Sections 6.2.B, 6.2.C or 6.3 hereof:

(1)Net Loss with respect to any Fiscal Year of the Company, other than Net Loss attributable to a disposition of any or all of the Real Properties, and other than

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Net Loss attributable to a Liquidating Event, shall be allocated to the Members and Assignees in proportion to their Sharing Percentages.

(2)Net Income with respect to any Fiscal Year of the Company, other than Net Income attributable to a disposition of any or all of the Real Properties, and other than Net Income attributable to a Liquidating Event, shall be allocated as follows:

(a)First, to each Member or Assignee in proportion to, and to the extent of, the amount that cumulative Net Loss previously allocated to such Member or Assignee pursuant to Section 6.2.A(1) exceeds the cumulative amount of Net Income previously allocated to such Member or Assignee pursuant to this Section 6.2.A(2)(a); and

(b)Second, to each Member or Assignee in an amount that will cause such allocation, together with the amount of all previous allocations of Net Income under this Section 6.2.A(2)(b) and Section 6.2.B(2)(b) to be in proportion to and to the extent of the cumulative distributions received by such Member or Assignee pursuant to Sections 5.1.A, 5.6.A(1), 5.6(A)(2) (but only to the extent of the Profit Participation Amount) and 5.6.B(1) for the current and all prior Fiscal Years; and

(c)Thereafter, to each Member or Assignee pro rata to such Member’s or Assignee’s Sharing Percentage.

B.Net Income and Net Loss from the Disposition of Properties. Except as otherwise provided in Sections 6.2.C or 6.3:

(1)Net Loss attributable to a disposition of any or all of the Properties shall be allocated to the Members and Assignees in proportion to their Sharing Percentages.

(2)Net Income attributable to a disposition of any or all of the Properties shall be allocated as follows:

(a)First, to each Member or Assignee in proportion to, and to the extent of, the amount that cumulative Net Loss previously allocated to such Member or Assignee pursuant to Section 6.2.B(1) exceeds the cumulative amount of Net Income previously allocated to such Member or Assignee pursuant to this Section 6.2.B(2)(a);

(b)Second, to each Member or Assignee in an amount that will cause such allocation, together with the amount of all previous allocations of Net Income under this Section 6.2.B(2)(b) and Section 6.2.A(2)(b) to be in proportion to and to the extent of the cumulative distributions received by such Member or Assignee pursuant to Sections 5.1.A, 5.6.A(1), 5.6(A)(2) (but only to the extent of the Profit Participation Amount) and 5.6.B(1) for the current and all prior Fiscal Years; and

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(c)Thereafter, to each Member or Assignee pro rata to such Member’s or Assignee’s Sharing Percentage.

C.Net Income and Net Loss Upon Liquidation. If a Liquidating Event occurs in a Fiscal Year, or if the number of LLC Units held by the Non-Managing Members have been reduced (pursuant to Section 5.6.C or otherwise) to zero, Net Income or Net Loss (or, if necessary, separate items of income, gain, loss and deduction) for such Fiscal Year and any Fiscal Years thereafter shall, subject to Section 6.3, be allocated among the Members, as follows:

(1)First, to holders of Non-Managing Member Units, pro rata to their Percentage Interests, in such amounts as will cause, to the greatest extent possible, each such holder’s Capital Account per Non-Managing Member Unit (if any) to be equal to the sum of (a) such holder’s Preferred Return Shortfall per unit, (b) the product of (i) the Value of a REIT Share (with the date of the liquidating distribution being the Valuation Date), and (ii) the Adjustment Factor (with the product set forth in (b) being equal to zero if the number of outstanding Non-Managing Member Units has been reduced (pursuant to Section 5.6.C, or otherwise) to zero), and (c) an amount equal to (x) the NMM Sharing Amount, calculated as if all of the Properties then owned by the Company were sold in a taxable transaction at their fair market values, divided by (y) the total number of Non-Managing Member Units then outstanding; and

(2)Thereafter, to the Managing Member.

6.3Additional Allocation Provisions

A.Regulatory Allocations.

(1)Minimum Gain Chargeback. Except as otherwise provided in Regulations Section 1.704-2(f), notwithstanding the provisions of Section 6.2 hereof, or any other provision of this Article 6, if there is a net decrease in Company Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be allocated shall be determined in accordance with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.A(1) is intended to qualify as a “minimum gain chargeback” within the meaning of Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

(2)Member Minimum Gain Chargeback. Except as otherwise provided in Regulations Section 1.704-2(i)(4) or in Section 6.3.A(1) hereof, if there is a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal Year, each Member who has a share of the Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such

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Member’s share of the net decrease in Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3.A(2) is intended to qualify as a “chargeback of partner nonrecourse debt minimum gain” within the meaning of Regulations Section 1.704-2(i) and shall be interpreted consistently therewith.

(3)Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Member(s) who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable, in accordance with Regulations Section 1.704-2(i).

(4)Qualified Income Offset. If any Member unexpectedly receives an adjustment, allocation or distribution described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be allocated, in accordance with Regulations Section 1.704-1(b)(2)(ii)(d), to such Member in an amount and manner sufficient to eliminate, to the extent required by such Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section 6.3.A(4) shall be made if and only to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided in this Article 6 have been tentatively made as if this Section 6.3.A(4) were not in the Agreement. It is intended that this Section 6.3.A(4) qualify and be construed as a “qualified income offset” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

(5)Limitation on Allocation of Net Loss. To the extent that any allocation of Net Loss would cause or increase an Adjusted Capital Account Deficit as to any Member, such allocation of Net Loss shall be reallocated among the other Members in accordance with their respective LLC Units, subject to the limitations of this Section 6.3.A(5).

(6)Section 754 Adjustment. To the extent that an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of its interest in the Company, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Members in accordance with their LLC Units in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Members to whom such distribution was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

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(7)Curative Allocations. The allocations set forth in Sections 6.3.A(1) through (6) hereof (the “Regulatory Allocations”) are intended to comply with certain regulatory requirements, including the requirements of Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding the provisions of Sections 6.1 and 6.2 hereof, the Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Members so that, to the extent possible without violating the requirements giving rise to the Regulatory Allocations, the net amount of such allocations of other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to each such Member if the Regulatory Allocations had not occurred.

B.Allocation of Excess Nonrecourse Liabilities. For purposes of determining a Member’s proportional share of the “excess nonrecourse liabilities” of the Company within the meaning of Regulations Section 1.752-3(a)(3), each Member’s interest in Company profits shall be such Member’s Percentage Interest.

6.4Tax Allocations

A.In General. Except as otherwise provided in this Section 6.4, for income tax purposes under the Code and the Regulations each of the Company’s Tax Items shall be allocated among the Members in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Sections 6.2 and 6.3 hereof.

B.Allocations Respecting Section 704(c) Revaluations. Notwithstanding Section 6.4.A hereof, Tax Items with respect to Property that is contributed to the Company with a Gross Asset Value that varies from its basis in the hands of the contributing Member immediately preceding the date of contribution shall be allocated among the Members for income tax purposes pursuant to the “traditional method” as described in Regulations Section 1.704-3(b). In the event that the Gross Asset Value of any Company asset is adjusted pursuant to subsection (b) of the definition of “Gross Asset Value” (provided in Article 1 hereof), subsequent allocations of Tax Items with respect to such asset (other than Tax Items governed by the previous sentence) shall take account of the variation, if any, between the adjusted basis of such asset and its Gross Asset Value in the same manner as under Code Section 704(c) and the applicable Regulations and this Section 6.4.B, pursuant to any method permitted under Regulations Section 1.704-3 as selected by the Managing Member

6.5Other Provisions

A.Other Allocations. In the event that (i) any modifications are made to the Code or any Regulations, (ii) any changes occur in any case law applying or interpreting the Code or any Regulations, (iii) the IRS changes or clarifies the manner in which it applies or interprets the Code or any Regulations or any case law applying or interpreting the Code or any Regulations or (iv) the IRS adjusts the reporting of any of the transactions contemplated by this Agreement which, in each case as reasonably and in good faith determined by the Managing Member, either (a) requires allocations of items of income, gain, loss, deduction or credit or (b) requires reporting of any of the transactions contemplated by this Agreement in a manner different from that set forth in this Article 6, the Managing Member is hereby authorized to make

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new allocations or report any such transactions (as the case may be) in reliance of the foregoing, and such new allocations and reporting shall be deemed to be made pursuant to the fiduciary duty of the Managing Member to the Company and the other Members, and no such new allocation or reporting shall give rise to any claim or cause of action by any Member.

B.Consistent Tax Reporting. The Members acknowledge and are aware of the income tax consequences of the allocations made by this Article 6 and hereby agree to be bound by the provisions of this Article 6 in reporting their shares of Net Income, Net Loss and other items of income, gain, loss, deduction and credit for federal, state and local income tax purposes.

6.6Amendments to Allocation to Reflect Issuance of Additional Membership Interests

In the event that the Company issues additional Membership Interests to the Managing or any Additional Member pursuant to Article 4 hereof, the Managing Member shall make such revisions to this Article 6 as it determines are necessary to reflect the terms of the issuance of such additional Membership Interests, including making preferential allocations to certain classes of Membership Interests.

ARTICLE VII.
MANAGEMENT AND OPERATION OF BUSINESS

7.1Management

A.Except as otherwise expressly provided in this Agreement, the Managing Member, in its capacity as a Managing Member of the Company under the Act, shall have sole and complete charge and management over the business and affairs of the Company, in all respects and in all matters. The Managing Member shall at all times act in good faith in exercising its powers hereunder. The Managing Member shall be an agent of the Company’s business, and the actions of the Managing Member taken in such capacity and in accordance with this Agreement shall bind the Company. The Managing Member shall at all times be a Member of the Company. Except as otherwise expressly provided in this Agreement or required by any non-waivable provisions of applicable law, the Non-Managing Members shall not participate in the control of the Company, shall have no right, power or authority to act for or on behalf of, or otherwise bind, the Company and shall have no right to vote on or consent to any other matter, act, decision or document involving the Company or its business. The Managing Member may not be removed by the Members with or without cause, except with the consent of the Managing Member. In addition to the powers now or hereafter granted a manager of a limited liability company under applicable law or that are granted to the Managing Member under any other provision of this Agreement, the Managing Member, subject to the other provisions hereof including the limitations on the authority of the Managing Member set forth in Sections 4.3A and 7.3 hereof, shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Company, to exercise all powers set forth in Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1 hereof, including, without limitation:

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(1)except as restricted in this Agreement, the making of any expenditures, the lending or borrowing of money (including loans to the Managing Member), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness (including the securing of the same by deed to secure debt, mortgage, deed of trust or other lien or encumbrance on the Company’s assets) and the incurring of any obligations that it deems necessary for the conduct of the activities of the Company;

(2)the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Company;

(3)except as restricted in this Agreement, the acquisition, sale, transfer, exchange or other disposition of any assets of the Company (including, but not limited to, the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by the Company);

(4)except as restricted in this Agreement, the mortgage, pledge, encumbrance or hypothecation of any assets of the Company (including, without limitation, any Property), the use of the assets of the Company (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement which the Managing Member believes will directly benefit the Company and on any terms that the Managing Member sees fit, including, without limitation, the financing of the conduct or the operations of the Company, the lending of funds to other Persons (including, without limitation, the Managing Member (if necessary to permit the financing or capitalization of a Subsidiary of the Managing Member or the Company)) and the repayment of obligations of the Company;

(5)the management, operation, leasing, landscaping, repair, alteration, demolition, replacement or improvement of any Property, including, without limitation, any Property, or other asset of the Company or any Subsidiary of the Company;

(6)the negotiation, execution and performance of any contracts, leases, conveyances or other instruments that the Managing Member considers useful or necessary to the conduct of the Company’s operations or the implementation of the Managing Member’s powers under this Agreement, including, without limitation, (i) contracting with property managers (including, without limitation, as to any Property, contracting with the contributing or any other Member or its Affiliates for property management services), contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Company’s assets, and (ii) the execution, delivery and performance of the Contribution Agreement and the agreements and instruments referred to therein or contemplated thereby, including the Registration Rights Agreement (as defined on the Contribution Agreement);

(7)the distribution of Company cash or other Company assets in accordance with this Agreement, the holding, management, investment and reinvestment

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of cash and other assets of the Company consistent with established investment policies of the Managing Member, and the collection and receipt of revenues, rents and income of the Company;

(8)the selection and dismissal of employees of the Company or the Managing Member (including, without limitation, employees having titles or offices such as “president,” “vice president,” “secretary” and “treasurer”), and agents, outside attorneys, accountants, consultants and contractors of the Company or the Managing Member and the determination of their compensation and other terms of employment or hiring;

(9)the maintenance of such insurance including (i) liability insurance for the Indemnitees hereunder and (ii) casualty, liability, earthquake and other insurance on the Properties of the Company for the benefit of the Company and the Members comparable in coverage to that maintained by the Managing Member with respect to the properties it owns and otherwise as it deems necessary or appropriate;

(10)the control of any matters affecting the rights and obligations of the Company, including the settlement, compromise, submission to arbitration or any other form of dispute resolution, or abandonment, of any claim, cause of action, liability, debt or damages, due or owing to or from the Company, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, and the representation of the Company in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurring of legal expense, and the indemnification of any Person against liabilities and contingencies to the extent permitted by law;

(11)subject to the provisions of Section 5.2 hereof, the determination of the fair market value of any Company property distributed in kind using such reasonable method of valuation as it may adopt; provided that such methods are otherwise consistent with the requirements of this Agreement;

(12)the enforcement of any rights against any Member pursuant to representations, warranties, covenants and indemnities relating to such Member’s contribution of property or assets to the Company;

(13)holding, managing, investing and reinvesting cash and other assets of the Company;

(14)the collection and receipt of revenues and income of the Company;

(15)the exercise, directly or indirectly, through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any asset or investment held by the Company;

(16)the exercise of any of the powers of the Managing Member enumerated in this Agreement on behalf of or in connection with any Subsidiary of the

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Company or any other Person in which the Company has a direct or indirect interest, or jointly with any such Subsidiary or other Person;

(17)the exercise of any of the powers of the Managing Member enumerated in this Agreement on behalf of any Person in which the Company does not have an interest pursuant to contractual or other arrangements with such Person;

(18)the maintenance of working capital and other reserves in such amounts as the Managing Member deems appropriate and reasonable from time to time;

(19)the making, execution and delivery of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or legal instruments or agreements in writing necessary or appropriate in the judgment of the Managing Member for the accomplishment of any of the powers of the Managing Member enumerated in this Agreement;

(20)the distribution of cash to acquire LLC Units held by a Member in connection with a Member’s exercise of its Redemption Right under Section 8.6 hereof;

(21)the amendment and restatement of Exhibit A hereto to reflect accurately at all times the Capital Accounts, LLC Units, and Percentage Interests of the Members as the same are adjusted from time to time to the extent necessary to reflect redemptions, Capital Contributions, the issuance of or reduction in the number of LLC Units, the admission of any Additional Member or any Substituted Member or otherwise, as long as the matter or event being reflected in Exhibit A hereto otherwise is authorized by this Agreement;

(22)admit into the Company any Additional or Substituted Managing Member in accordance with Section 12.2 hereof;

(23)admit into the Company any Additional Member in accordance with Section 12.3 hereof;

(24)the transfer of any Property to any wholly-owned Subsidiary of Company for financing or other purposes deemed appropriate by the Managing Member; and

(25)without in any way limiting the generality of Section 7.1A(24), the transfer of any Property to a limited partnership, limited liability company or other form of business entity (a “Welfare Structure”), other than an association taxable as a corporation for federal income tax purposes, for the purpose of owning title to a Property in order to attempt to establish or maintain the right to receive a welfare property tax exemption. In connection with such Welfare Structure, it is acknowledged that the managing general partner, managing member or other Person controlling of the Welfare Structure shall be a 501(c)(3) corporation or other permitted entity formed under applicable law and will hold no more than 0.1% managing general partner, managing member or other equity interest in and to such Welfare Structure, and the co-managing

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general partner, co-managing member or co-controlling Person shall be the Company (or a Subsidiary of the Company) and will own at least a 0.9% co-managing general partner, managing member interest or controlling interest and a 99% limited partner, non-managing member or non-controlling interest in and to such Welfare Structure. All organizational documents for such Welfare Structure shall be satisfactory to the Managing Member.

B.Each of the Non-Managing Members agrees that, except as provided in this Agreement, the Managing Member is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Company without any further act, approval or vote of the Non-Managing Members, notwithstanding any other provision the Act or any applicable law, rule or regulation. The execution, delivery or performance by the Managing Member or the Company of any agreement authorized or permitted under this Agreement shall not constitute a breach by the Managing Member of any duty that the Managing Member may owe the Company or the Members or any other Persons under this Agreement or of any duty stated or implied by law or equity.

C.At all times from and after the date hereof, the Managing Member may cause the Company to establish and maintain working capital reserves in such amounts as the Managing Member, in its sole and absolute discretion, deems appropriate and reasonable from time to time.

D.Except as otherwise expressly provided in this Agreement, the Managing Member may, but shall be under no obligation to, take into account the tax consequences to any Member (including the Managing Member) of any action taken by it. Except as otherwise expressly provided in this Agreement, the Managing Member and the Company shall not have liability to a Member under any circumstances as a result of an income tax liability incurred by such Member as a result of an action (or inaction) by the Managing Member pursuant to its authority under this Agreement so long as the action or inaction is taken in good faith.

7.2Certificate of Formation

To the extent that such action is determined by the Managing Member to be reasonable and necessary or appropriate, the Managing Member shall file amendments to and restatements of the Certificate and do all the things to maintain the Company as a limited liability company under the laws of the State of Delaware and each other state, the District of Columbia or any other jurisdiction in which the Company may elect to do business or own property. Subject to the terms of Section 8.5.A(4) hereof, the Managing Member shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto to any Member. The Managing Member shall use all reasonable efforts to cause to be filed such other certificates or documents as may be commercially reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited liability company in the State of Delaware and any other state, or the District of Columbia or other jurisdiction in which the Company may elect to do business or own property.

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7.3Restrictions on Managing Member’s Authority

A.The Managing Member may not take any action in contravention of an express prohibition or limitation of this Agreement, including, without limitation:

(1)take any action that would make it impossible to carry on the ordinary business of the Company, except as otherwise provided in this Agreement;

(2)possess Company property, or assign any rights in specific Company property, for other than a Company purpose except as otherwise provided in this Agreement;

(3)perform any act that would subject a Member to liability as a Managing Member in any jurisdiction or any other liability except as provided herein or under the Act; or

(4)enter into any contract, mortgage, loan or other agreement that expressly prohibits or restricts, or has the effect of prohibiting or restricting, the ability of (a) the Managing Member or the Company from satisfying its obligations under Section 8.6 hereof in full or (b) a Member from exercising its rights to a Redemption in full, except, in either case, with the written consent of such Member affected by the prohibition.

B.Subject to the provisions of Section 11.2 hereof, the Managing Member shall not, without the prior Consent of the Non-Managing Members undertake or have the authority to do or undertake, on behalf of the Company, any of the following actions or enter into any transaction which would have the effect of such transactions:

(1)except as provided in Section 7.3.C and except in connection with a dissolution or termination of the Company permitted by Section 7.3.E, amend, modify or terminate this Agreement other than to reflect the admission, substitution, termination or withdrawal of Members pursuant to Article 11 or Article 12 hereof;

(2)except as provided in Section 11.2 hereof, approve or acquiesce to the Transfer of the Membership Interest of the Managing Member to any Person other than the Company;

(3)except as provided in Section 12.3 hereof, admit into the Company any Additional Member;

(4)make a general assignment for the benefit of creditors or appoint or acquiesce in the appointment of a Custodian for all or any part of the assets of the Company;

(5)institute any proceeding for bankruptcy on behalf of the Company; or

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(6)acquire any Properties other than the Contributed Properties and any Successor Properties and any assets or other Property subsequently acquired that are directly related to the Contributed Properties or any Successor Properties;

(7)incur any Debt in violation of the provisions of Section 4.3A hereof.

C.Notwithstanding Section 7.3.B, the Managing Member shall have the exclusive power to amend this Agreement as may be required to facilitate or implement any of the following purposes:

(1)to reflect the issuance of additional Membership Interests pursuant to Section 4.4, to reflect the admission, substitution, termination, or withdrawal of Members in accordance with this Agreement and to amend Exhibit A in connection therewith and to reflect the redemption or other reduction in the number of LLC Units outstanding pursuant to Section 5.6 hereof and as otherwise permitted by this Agreement;

(2)to reflect a change that is of an inconsequential nature and does not adversely affect the Non-Managing Members in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with law or with other provisions, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with law or with the provisions of this Agreement;

(3)to satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law;

(4)to reflect such changes as are reasonably necessary for the Managing Member to maintain its status as a REIT or to satisfy the REIT Requirements;

(5)to modify, as set forth in the definition of “Capital Account,” the manner in which Capital Accounts are computed; and

(6)to add to the obligations of the Managing Member or surrender any right or power granted to the Managing Member or any Affiliate of the Managing Member for the benefit of the Non-Managing Member.

D.Notwithstanding Section 7.3.B and 7.3.C hereof, this Agreement shall not be amended with respect to any Member adversely affected, and no action may be taken by the Managing Member, without the Consent of such Member adversely affected if such amendment or action would (i) convert a Non-Managing Member’s interest in the Company into a Managing Member’s interest, (ii) modify the limited liability of a Non-Managing Member, (iii) alter rights of the Member to receive distributions pursuant to Article 5 or Section 13.3.A(4), or the allocations specified in Article 6 (except as permitted pursuant to Sections 4.2, 4.3 and 4.4 and Section 7.3.C(1) hereof), (iv) materially alter or modify the rights to a Redemption as set forth in Section 8.6, or the rights to a Make-Whole Payment as set forth in Sections 7.3.E, 7.3.F, 7.3.G and 7.3.H hereof, and related definitions hereof, (v) amend this Section 7.3.D or (vi) alter or modify Section 11.2A. Further, no amendment may alter the restrictions on the Managing

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Member’s authority set forth elsewhere in this Section 7.3 without the Consent specified in such section. Any such amendment or action consented to by any Member shall be effective as to that Member, notwithstanding the absence of such consent by any other Member.

E.The Company shall pay to each Non-Managing Member the Make-Whole Payment, if any, as provided below if the Company takes any of the following actions during the Tax Protection Period without the prior Consent of the Non-Managing Members, which consent expressly states that the Make-Whole Payment is being waived:

(1)cause or permit the Company (w) to merge, consolidate or combine with or into any other partnership, limited partnership, limited liability company, corporation or other person (other than with a Subsidiary of the Company), (x) to sell or otherwise dispose of all or substantially all of its assets (other than to a Subsidiary of the Company), (y) to reclassify or change its outstanding equity interests or (z)  to enter into a Termination Transaction;

(2)sell, dispose, convey or otherwise transfer any of the Contributed Properties or Successor Properties, in a transaction that causes holders of Non-Managing Member Units to recognize taxable income under the Code on account of a Built-in Gain, other than (i) a casualty loss, (ii) taking by eminent domain (other than a disposition resulting from the mere threat of eminent domain); or (iii) pursuant to the exercise of a purchase right by any other Person pursuant to which such Person has the right to purchase one or more Contributed Properties, which purchase right was granted pursuant to any document or instrument executed in accordance with the Contribution Agreement or in effect at the time such Contributed Properties were contributed to the Company; provided that the Company has first used commercially reasonable efforts to structure such disposition as either a tax-free like-kind exchange under Section 1031 of the Code or as a tax-free investment under Section 1033 of the Code; or

(3)(A) replaces or refinances any Debt set forth on Schedule 7.3 encumbering the Contributed Properties (“Existing Indebtedness”), unless such Debt is replaced or refinanced with other Debt satisfying the requirements set forth below (“Replacement Indebtedness”), or (B) prepay the Existing Indebtedness or any Replacement Indebtedness, including Replacement Indebtedness assumed or taken subject to in a transaction qualifying under Code Section 1031; provided, however, the above limitations shall not prevent (i) regularly scheduled periodic principal payments on Existing Indebtedness or Replacement Indebtedness (including full payment at maturity) and (ii) the replacement, prepayment, or refinancing of the Existing Indebtedness or any Replacement Indebtedness, provided such replacement, prepayment, or refinancing shall be made with Replacement Indebtedness. Any Replacement Indebtedness shall:

(a)not require principal repayments during such period that would cause the principal balance of such Replacement Indebtedness to be less than the principal balance of the Existing Indebtedness or Replacement Indebtedness replaced by such debt, at any time during the Tax Protection Period;

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(b)be either (i) provided by a lender that does not have an interest in the Company and is not related to the Company in any manner (other than as a lender), or (ii) of a nature and source such that it would not disqualify the guarantee of such indebtedness from preventing the recapture pursuant to Section 465(e) of the Code of losses claimed by a Non-Managing Member prior to the Closing Date (with the Company permitted to assume for this purpose that a guarantee is effective to make the guarantor “at risk” for purposes of Section 465 of the Code with respect to debt that otherwise satisfies the requirements of Section 465);

(c)satisfy either of the following requirements (i) the fair market value of the collateral against which the lender has recourse with respect to such Debt as of the time the guarantee would be entered into is not less than 133% of the sum of (x) the aggregate amount of the guarantees to be provided under clause (4) below with respect to the debt, plus (y) the dollar amount of any other indebtedness that is senior to or pari passu with such Debt and as to which the lender thereunder has recourse against property that is collateral for the Company Debt that will be guaranteed, plus (z) the aggregate amounts of any other guarantees that are pari passu with, or at a lower level of risk than, the guarantees provided by Non-Managing Members pursuant to clause (4) below, or (ii) the Debt is a general recourse liability of the Company under which the lender is not limited in its recourse to the assets of the Company; and

(d)either (i) not be subject to a guarantee, reimbursement or indemnity agreement provided by any Person other than the Company or a Non-Managing Member that is executing such an agreement pursuant to clause (4), or other than a customary nonrecourse carve-out guarantee, environmental indemnity or similar guarantee or indemnity given by the Managing Member or its affiliates, or (ii) not have any Person who might be considered to “bear the economic risk of loss”  or to be “at risk” with respect to such Debt unless such Person is the Managing Member or one of its affiliates and the Initial Non-Managing Members are permitted to enter into an indemnity agreement with such Person on terms reasonably satisfactory to such Non-Managing Members so as to cause the Initial Non-Managing Members to “bear the economic risk of loss”  or to be “at risk” with respect to such debt vis-a-vis such Person.

(4)fails to provide each Non-Managing Member with the ongoing opportunity during the Tax Protection Period to guarantee the Existing Indebtedness or Replacement Indebtedness of the Company (or enter into a reimbursement agreement with respect to such Debt) in an amount up to its share of the Total Debt Amount as determined by the Non-Managing Member Representative, provided that the aggregate amount to be guaranteed shall not exceed the Total Debt Amount. If a Non-Managing Member elects to guarantee debt as described in this Section 7.3.E(4), the Company, the Managing Member, and such Non-Managing Member agree to enter into a reimbursement or bottom dollar guarantee agreement substantially in the form attached hereto as Exhibit E or in such other form as may be reasonably acceptable to the lender and such Non-Managing Member. Subject to the limitations in Section 7.3.E(3), if the

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Company intends to repay, in whole or in part, or to substitute other Debt for, Debt of the Company that one or more Non-Managing Members has guaranteed (or with respect to which one or more Non-Managing Members has entered into a reimbursement or bottom dollar guarantee agreement) in accordance with this Section 7.3.E(4), the Company shall provide written notice, together with an opportunity for each such Non-Managing Member to guarantee the Replacement Indebtedness on the terms described above, to the Non-Managing Member Representative prior to such repayment or substitution and such additional information as the Non-Managing Member Representative shall reasonably request to permit such Non-Managing Member(s) to decide whether or not to enter into different and/or additional guarantees or reimbursement agreements (as the case may be). The notice described in the immediately preceding sentence shall be deemed to have been satisfied so long as the Company provides notice to the Non-Managing Member Representative at least fifteen (15) calendar days prior to any such repayment or substitution of Debt.

In the event that the prior Consent of the Non-Managing Members is not required for the Managing Member, on behalf of the Company, to take or engage in any of the actions described in the foregoing subparagraphs (1) and (2), the Managing Member may take such action only after providing the Non-Managing Members with not less than fifteen (15) days notice of its intention to do so.

F.The Company shall pay to the Non-Managing Members the Make-Whole Payment as provided below if the Company takes any action to dissolve or otherwise terminate the Company during the Tax Protection Period. In addition, a Non-Managing Member shall be entitled to the Make Whole Payment in the event of the exercise of such Non-Managing Member’s right to a Redemption under Section 8.6.A after receipt by such Non-Managing Member of a written notice of a Liquidating Event provided by the Company to the same extent such Non-Managing Member would have been entitled to such Make Whole Payment had such Non-Managing Member not have been redeemed pursuant to such Redemption. In the event the Managing Member intends to dissolve or otherwise terminate the Company following the Tax Protection Period, it shall give not less than fifteen (15) days notice to that effect to the Non-Managing Members prior to taking any such action in furtherance of such intent.

G.Any event in Sections 7.3.E and 7.3.F that triggers the obligation of the Company to make a Make-Whole Payment (as defined below) is called a “Triggering Event.”  The Company shall pay to each Non-Managing Member an amount (the “Make-Whole Payment”) equal to the aggregate federal, state and local income taxes, if any, incurred by the Non-Managing Member as a result of a Triggering Event. Any such federal, state and local income taxes shall be deemed to be the amount of Built-in Gain recognized by the Non-Managing Members multiplied by the then highest rate or rates applicable to such Built-in Gain for the year in which such Built-in Gain is recognized grossed up to include any federal, state and local income taxes incurred by the Non-Managing Member by reason of the receipt of the payment from the Company. No effect shall be given, in determining the amount of the Make-Whole Payment, to a Non-Managing Member’s taxable income, tax deductions, tax credits, tax carry forwards nor to any other of their tax benefits or tax attributes (except that state and local taxes paid on account of the Make Whole Payment shall be deducted in determining federal income taxes for purposes of determining the Make Whole Payment). The Make-Whole

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Payment shall be made within a reasonable period of time after the Triggering Event, but in no event later than: (i) April 10 of the year in which the Triggering Event occurs if the Triggering Event occurs prior to April 1 of such year; (ii) June 10 of the year in which the Triggering Event occurs if the Triggering Event occurs after March 31 but prior to June 1 of such year; (iii) September 10 of the year in which the Triggering Event occurs if the Triggering Event occurs after May 31 but prior to September 1 of such year; and (iv) January 10 of the year immediately following the year in which the Triggering Event occurs if the Triggering Event occurs after August 31 of such year. In addition to any other rights available under law or equity, in the event that the Company fails to pay any amounts owed pursuant to this Section 7.3 when due, the Non-Managing Member to whom such payment is owed shall be deemed to have loaned such amount to the Company. Any amounts payable to a Non-Managing Member shall be increased by an amount equal to the greater of (x) interest accrued on such amount at the Prime Rate from the date such amount is due until such amount is paid in full and (y) actual interest and penalties accrued by the relevant taxing authorities with respect to such amounts plus any penalties actually imposed thereon by the relevant taxing authorities. In the event that any Member becomes entitled to a Make Whole Payment and the Company, for any reason, fails to satisfy such obligation, then the Managing Member shall make the Make Whole Payment promptly following such failure by the Company to make such Make Whole Payment. The Make Whole Payment shall be in addition to, and shall not in any manner reduce, the amounts distributable or payable to the Non-Managing Members pursuant to the other provisions of this Agreement (calculated as if there had been no Make Whole Payment). In the event that any Non-Managing Member becomes entitled to a Make Whole Payment, then, on or before the date on which such Make Whole Payment is payable to the Non-Managing Member, the Managing Member shall make a capital contribution to the Company of cash in an amount equal to said Make Whole Payment.

H.The parties agree that the sole and exclusive rights and remedies to which the Non-Managing Members may be entitled at law or in equity in connection with any Triggering Event shall be for payment of the Make-Whole Payment pursuant to Section 7.3.G, and no Non-Managing Member shall be entitled to enjoin or otherwise object to any transactions that would result in a taxable event or pursue any other claim with respect to a Triggering Event. If any Non-Managing Member notifies the Company of a claim that the Company owes a Make-Whole Payment, the Managing Member, on behalf of the Company, and the Non-Managing Member shall negotiate in good faith to resolve any disagreements regarding any such Triggering Event. If any such disagreement cannot be resolved by the parties within thirty (30) days after the receipt by the Company of the notice in accordance with the preceding sentence, the Managing Member, on behalf of the Company, and the Non-Managing Member shall jointly retain a nationally recognized independent public accounting firm (an “Accounting Firm”) to act as an arbitrator to resolve as expeditiously as possible all points of any such disagreement (including, without limitation, whether a Triggering Event has occurred and, if so, the amount of the applicable Make-Whole Payment that the Non-Managing Member is entitled to as a result thereof, determined as set forth in Section 7.3.G). If the parties cannot agree on an Accounting Firm, each of the Managing Member, on behalf of the Company, and the Non-Managing Member shall retain an Accounting Firm, and the Accounting Firms selected shall jointly retain a third Accounting Firm. If the two Accounting Firms cannot agree upon a third Accounting Firm within thirty (30) days, such matter shall be referred to a court of competent jurisdiction to select the third Accounting Firm. The Accounting Firms shall be instructed to resolve as expeditiously

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as possible all points of any such disagreement (including, without limitation, whether a Triggering Event has occurred and, if so, the amount of the applicable Make-Whole Payment that the Non-Managing Member is entitled to as a result thereof, determined as set forth in Section 7.3.G). All determinations made by the Accounting Firm or the Accounting Firms, as the case may be, with respect to the resolution of whether a Triggering Event has occurred shall be final, conclusive and binding on the Company and the Non-Managing Member. The fees and expenses of any Accounting Firms incurred in connection with any such determination shall be shared equally by the Company and the Non-Managing Member.

7.4Compensation of the Managing Member

A.The Managing Member shall not be compensated for its services as the manager of the Company. Distributions, payments and allocations to which the Managing Member may be entitled in its capacity as the Managing Member shall not constitute compensation for services rendered by the Managing Member as provided in this Agreement (including the provisions of Articles 5 and 6 hereof).

B.Subject to Section 7.4.C hereof, the Company shall be liable, and shall reimburse the Managing Member on a monthly basis (or such other basis as the Managing Member may determine in its sole and absolute discretion), for all sums expended in connection with the Company’s business. Any such reimbursements shall be in addition to any reimbursement of the Managing Member as a result of indemnification pursuant to Section 7.7 hereof.

C.To the extent practicable, Company expenses shall be billed directly to and paid by the Company. Reimbursements to the Managing Member or any of its Affiliates by the Company shall be allowed, however, for the actual cost to the Managing Member or any of its Affiliates of operating and other expenses of the Company, including, without limitation, the actual cost of goods, materials and administrative services related to (i) Company operations, (ii) company accounting, (iii) communications with Members, (iv) legal services, (v) tax services, (vi) computer services, (vii) risk management, (viii) mileage and travel expenses and (ix) such other related operational and administrative expenses as are necessary for the prudent organization and operation of the Company. “Actual cost of goods and materials” means the actual cost to the Managing Member or any of its Affiliates of goods and materials used for or by the Company obtained from entities not affiliated with the Managing Member, and “actual cost of administrative services” means the pro rata cost of personnel (as if such persons were employees to the Company) providing administrative services to the Company. The cost for such services to be reimbursed to the Managing Member or any Affiliate thereof shall be the lesser of the Managing Member’s or Affiliate’s actual cost, or the amount the Company would be required to pay to independent parties for comparable administrative services in the same geographic location.

D.In addition to any reimbursements to which Managing Member is entitled pursuant to Sections 8.6 and 11.3 hereof and Section 3.4 or elsewhere in each Registration Rights Agreement, the Managing Member shall also be reimbursed for all expenses it incurs relating to any issuance of additional Membership Interests, Debt of the Company, or rights, options, warrants or convertible or exchangeable securities of the Company pursuant to Article VIII

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hereof (including, without limitation, all costs, expenses, damages and other payments resulting from or arising in connection with litigation related to any of the foregoing), all of such expenses are considered by the Members to constitute expenses of, and for the benefit of, the Company.

To the extent that reimbursements to the Managing Member or any of its Affiliates by the Company pursuant to this Section 7.4 would constitute gross income to the Managing Member for purposes of Code Section 856(c)(2) or 856(c)(3), then such amounts shall be treated as “guaranteed payments” within the meaning of Code Section 707(c).

7.5Other Business of Managing Member

The Managing Member shall devote to the Company such time as may be necessary for the performance of its duties as Managing Member, but the Managing Member is not required, and is not expected, to devote its full time to the performance of such duties. The Managing Member may engage independently or with others in other business ventures of every nature and description, including, without limitation, the ownership of other properties and the making or management of other investments. Nothing in this Agreement shall be deemed to prohibit the Managing Member or any Affiliate of the Managing Member from dealing, or otherwise engaging in business with, Persons transacting business with the Company, or from providing services related to the purchase, sale, financing, management, development or operation of real or personal property and receiving compensation therefor, not involving any rebate or reciprocal arrangement that would have the effect of circumventing any restriction set forth herein upon dealings with the Managing Member or any Affiliate of the Managing Member. Neither the Company nor any Member shall have any right by virtue of this Agreement or the relationship created hereby in or to such other ventures or activities or to the income or proceeds derived therefrom, and the pursuit of such ventures, even if competitive with the business of the Company, shall not be deemed wrongful or improper.

7.6Contracts with Affiliates

A.Subject to Section 7.6.B below, the Company may lend or contribute to Persons in which it has an equity investment, and such Persons may borrow funds from the Company, on terms and conditions established in the sole and absolute discretion of the Managing Member. The foregoing authority shall not create any right or benefit in favor of any Person.

B.The Managing Member or any of its Affiliates, directly or indirectly, shall be permitted to sell, transfer or convey any property to, or purchase any property from, or borrow funds from, or lend funds to, the Company or engage in any other transaction with the Company, but only upon terms determined by the Managing Member in good faith to be fair and reasonable and comparable to terms that could be obtained from an unaffiliated party in an arm’s length transaction, except as otherwise expressly permitted by this Agreement.

7.7Indemnification

A.To the fullest extent permitted by applicable law, the Company shall indemnify each Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorney’s fees and other legal fees and

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expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Company (“Actions”) as set forth in this Agreement in which such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise unless it is established that: (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty; (ii) the Indemnitee actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. Without limitation the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise, for any indebtedness of the Company or any Subsidiary of the Company (including, without limitation, any indebtedness which the Company or any Subsidiary of the Company has assumed or taken subject to), and the Managing Member is hereby authorized and empowered, on behalf of the Company, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 7.7.A. The termination of any proceeding by conviction or upon a plea of nolo contendre or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee acted in a manner contrary to that specified in this Section 7.7.A with respect to the subject matter of such proceeding. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Company, and any insurance proceeds from the liability policy covering the Managing Member and any Indemnitees, and neither the Managing Member nor any Non-Managing Member shall have any obligation to contribute to the capital of the Company or otherwise provide funds to enable the Company to fund its obligations under this Section 7.7.

B.Reasonable expenses incurred by an Indemnitee who is a party to a proceeding or otherwise subject to or the focus of or is involved in any Action shall be paid or reimbursed by the Company as incurred by the Indemnitee in advance of the final disposition of the Action upon receipt by the Company of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized in Section 7.7.A has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.

C.The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Members, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity unless otherwise provided in a written agreement with such Indemnitee or in the writing pursuant to which such Indemnitee is indemnified.

D.The Company may, but shall not be obligated to, purchase and maintain insurance, on behalf of any of the Indemnitees and such other Persons as the Managing Member shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Company’s activities, regardless of whether the

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Company would have the power to indemnify such Person against such liability under the provisions of this Agreement.

E.In no event may an Indemnitee subject any of the Members to personal liability by reason of the indemnification provisions set forth in this Agreement.

F.An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

G.The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Company’s liability to any Indemnitee under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

H.If and to the extent any reimbursements to the Managing Member pursuant to this Section 7.7 constitute gross income to the Managing Member (as opposed to the repayment of advances made by the Managing Member on behalf of the Company) such amounts shall constitute guaranteed payments within the meaning of Code Section 707(c), shall be treated consistently therewith by the Company and all Members, and shall not be treated as distributions for purposes of computing the Members’ Capital Accounts.

7.8Liability of the Managing Member

A.Notwithstanding anything to the contrary set forth in this Agreement, neither the Managing Member nor any of its directors or officers shall be liable or accountable in damages or otherwise to the Company, any Members or any Assignees for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or of any act or omission if the Managing Member or such director or officer acted in good faith.

B.The Non-Managing Members expressly acknowledge that the Managing Member is acting for the benefit of the Company, the Members and the Managing Member’s shareholders collectively, that the Managing Member is under no obligation to give priority to the separate interests of the Members or the Managing Member’s shareholders (including, without limitation, the tax consequences to Members, Assignees or the Managing Member’s shareholders) in deciding whether to cause the Company to take (or decline to take) any actions and that the Managing Member shall not be liable to the Company or to any Member for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Non-Managing Members in connection with such decisions, provided that the Managing Member has acted in good faith and has not breached its express covenants set forth in this Agreement.

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C.Subject to its obligations and duties as Managing Member set forth in Section 7.1.A hereof, the Managing Member may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its employees or agents. The Managing Member shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.

D.Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Managing Member’s, and its officers’ and directors’, liability to the Company and the Non-Managing Members under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

7.9Other Matters Concerning the Managing Member

A.The Managing Member may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties.

B.The Managing Member may consult with legal counsel, accountants, appraisers, management consultants, investment bankers, architects, engineers, environmental consultants and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters that the Managing Member reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.

C.The Managing Member shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the Managing Member in the power of attorney, have full power and authority to do and perform all and every act and duty that is permitted or required to be done by the Managing Member hereunder.

D.Notwithstanding any other provisions of this Agreement or the Act, any action of the Managing Member on behalf of the Company or any decision of the Managing Member to refrain from acting on behalf of the Company undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the Managing Member to continue to qualify as a REIT, (ii) for the Managing Member otherwise to satisfy the REIT Requirements or (iii) to allow the Managing Member to avoid incurring any liability for taxes under Section 857 or Section 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Non-Managing Members. If in the opinion of the Managing Member any such action or omission shall adversely affect the rights of a Non-Managing Member hereunder, the Managing Member shall give the Non-Managing Member Representative notice of such intended action or omission.

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7.10Title to Company Assets

Title to Company assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Company as an entity, and no Member, individually or collectively with other Members or Persons, shall have any ownership interest in such Company assets or any portion thereof. All Company assets shall be recorded as the property of the Company in its books and records, irrespective of the name in which legal title to such Company assets is held.

7.11Reliance by Third Parties

Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Company shall be entitled to assume that the Managing Member has full power and authority, without the consent or approval of any other Member or Person, to encumber, sell or otherwise use in any manner any and all assets of the Company and to enter into any contracts on behalf of the Company, and take any and all actions on behalf of the Company, and such Person shall be entitled to deal with the Managing Member as if it were the Company’s sole party in interest, both legally and beneficially. Each Non-Managing Member hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the Managing Member in connection with any such dealing. In no event shall any Person dealing with the Managing Member or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expediency of any act or action of the Managing Member or its representatives. Each and every certificate, document or other instrument executed on behalf of the Company by the Managing Member or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Company and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Company.

ARTICLE VIII.
RIGHTS AND OBLIGATIONS OF MEMBERS

8.1Limitation of Liability

The Non-Managing Members shall have no liability under this Agreement except as expressly provided in this Agreement or under the Act.

8.2Managing of Business

No Non-Managing Member or Assignee (other than the Managing Member, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the Managing Member, the Company or any of their Affiliates, in their capacity as such) shall take part in the operations, management or control (within the meaning of the Act) of the Company’s business transact any business in the Company’s name or have the power to sign documents for or otherwise bind the Company. The transaction of any such business by the Managing Member,

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any of its Affiliates or any officer, director, employee, partner, agent or trustee of the Managing Member, the Company or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Non-Managing Members or Assignees under this Agreement.

8.3Outside Activities of Members

Subject to any agreements entered into by a Member or its Affiliates with the Managing Member, the Company or a Subsidiary (including, without limitation, any employment agreement), any Member and any Assignee, officer, director, employee, agent, trustee, Affiliate or shareholder of any Member shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Company, including business interests and activities that are in direct or indirect competition with the Company or that are enhanced by the activities of the Company. Neither the Company nor any Member shall have any rights by virtue of this Agreement in any business ventures of any Member or Assignee. Subject to such agreements, none of the Members nor any other Person shall have any rights by virtue of this Agreement or the relationship established hereby in any business ventures of any other Person (other than the Managing Member, to the extent expressly provided herein), and such Person shall have no obligation pursuant to this Agreement, subject to any agreements entered into by a Member or its Affiliates with the Managing Member, the Company or a Subsidiary, to offer any interest in any such business ventures to the Company, any Member or any such other Person, even if such opportunity is of a character that, if presented to the Company, any Member or such other Person, could be taken by such Person.

8.4Return of Capital

Except pursuant to the rights of Redemption set forth in Section 8.6 hereof, no Member shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Company as provided herein. Except to the extent provided in Article 5, Article 6 and Article 13 hereof or otherwise expressly provided in this Agreement, no Member or Assignee shall have priority over any other Member or Assignee either as to the return of Capital Contributions or as to profits, losses, distributions or credits.

8.5Rights of Non-Managing Members Relating to the Company

A.In addition to other rights provided by this Agreement or by the Act, and except as limited by Section 8.5.C hereof, each Non-Managing Member shall have the right, for a purpose reasonably related to such Non-Managing Member’s Membership Interest in the Company, upon written demand with a statement of the purpose of such demand and at such Non-Managing Member’s own expense:

(1)to obtain a copy of (i) the most recent annual and quarterly reports filed with the SEC by the Managing Member pursuant to the Exchange Act and (ii) each report or other written communication sent to the shareholders of the Managing Member;

(2)to obtain a copy of the Company’s federal, state and local income tax returns for each Fiscal Year;

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(3)to obtain a current list of the name and last known business, residence or mailing address of each Member;

(4)to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed; and

(5)to obtain true and full information regarding the amount of cash and a description and statement of any other property or services contributed by each Member, and the date on which each became a Member.

B.The Company shall notify any Non-Managing Member of the then current Adjustment Factor or any change made to the Adjustment Factor or to the REIT Shares Amount within 30 days following such change or adjustment.

C.Notwithstanding any other provision of this Section 8.5, the Managing Member may keep confidential from the Non-Managing Members, for such period of time as the Managing Member determines in its sole and absolute discretion to be reasonable, any information that (i) the Managing Member believes to be in the nature of trade secrets or other information the disclosure of which the Managing Member in good faith believes is not in the best interests of the Company or could damage the Company or its business or (ii) the Company or the Managing Member is required by law or by agreements with unaffiliated third parties to keep confidential.

8.6Redemption Rights

A.On or after the first (1^st) year anniversary of the Effective Date, each Non-Managing Member shall have the right (the “Redemption Right”) (subject to the terms and conditions set forth herein) to require the Company to redeem all or a portion of the Non-Managing Member Units held by such Non-Managing Member (all such Non-Managing Member Units being hereafter called “Tendered Units “) for the Cash Amount payable on the Specified Redemption Date (the “Redemption “); provided, however, that at the election of and in the sole and absolute discretion of the Managing Member, the Managing Member may elect to assume the Company’s obligation with respect to the Redemption (though such assumption shall not relieve the Company from such obligation in the event the Managing Member fails to fulfill such obligation) and, at the election of and in the sole and absolute discretion of the Managing Member, to satisfy the Redemption by (i) paying either the Cash Amount payable on the Specified Redemption Date or (ii) delivering a number of REIT Shares equal to the REIT Shares Amount payable on the Specified Redemption Date.  

B.Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the Company by the Non-Managing Member exercising the Redemption Right (the “Tendering Party”). On the Specified Redemption Date, the Tendering Party shall sell the Tendered Units to the Company or the Managing Member, as the case may be, in accordance with this Section 8.6. Any Tendered Units assumed by the Managing Member pursuant to this Section 8.6 shall be held by the Managing Member as Non-Managing Member Units with all the

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rights and preferences relating thereto as provided in this Agreement. The Tendering Party shall submit (i) such information, certification or affidavit as the Company may reasonably require in connection with the Ownership Limit and (ii) in the event the REIT Shares issuable upon such Redemption are not registered for resale under the Securities Act, such written representations, investment letters, legal opinions or other instruments necessary, in the Company’s view, to effect compliance with the Securities Act. If a Cash Amount is to be delivered upon the Redemption, the Cash Amount shall be delivered as a certified check payable to the Tendering Party or, in the Company’s or Managing Member’s sole discretion, as the case may be, in immediately available funds via wire transfer to an account or account(s) specified by the Tendering Party. If REIT Shares are to be delivered upon the Redemption, the REIT Shares Amount shall be delivered by the Managing Member as duly authorized, validly issued, fully paid and nonassessable REIT Shares (and, if applicable, Rights), free of any pledge, lien, encumbrance or restriction, other than the Ownership Limit, and other restrictions provided in the Charter or the Bylaws of the Managing Member in the event the REIT Shares issuable upon such Redemption are not registered for resale under the Securities Act, the Securities Act and relevant state securities or “blue sky” laws. The Tendering Party shall be deemed the owner of such REIT Shares and Rights for all purposes, including, without limitation, rights to vote or consent, receive dividends, and exercise rights, as of the Specified Redemption Date. REIT Shares issued upon an acquisition of the Tendered Units by the Managing Member pursuant to this Section 8.6 may contain such legends regarding restrictions on Transfer or ownership to protect the Managing Member’s tax status as a REIT and in the event the REIT Shares issuable upon such Redemption are not registered for resale under the Securities Act, restrictions under the Securities Act and applicable state securities laws as the Managing Member in good faith determines to be necessary or advisable in order to ensure compliance with such laws.

C.Notwithstanding the provisions of Sections 8.6.A and B hereof, the following shall apply:

(1)no Non-Managing Member, Assignee of a Non-Managing Member or any Substituted Member of a Non-Managing Member shall have any right to tender for Redemption (whether for the REIT Shares Amount or the Cash Amount) any Excess LLC Units held by such Non-Managing Member. The Managing Member shall have no obligation to acquire Excess LLC Units, whether for the REIT Shares Amount or the Cash Amount;

(2)No Non-Managing Member, Assignee or Substituted Member or any Substituted Member of a Non-Managing Member may exercise the Redemption Rights pursuant to Section 8.6.A and B hereof more than one (1) time during any Calendar Quarter. In determining whether such limit has been reached during any calendar year with respect to any Non-Managing Member or Substituted Member, it is understood and agree that the exercise of the Redemption rights by any Assignee of such Non-Managing Member or Substituted Member shall be counted for all purposes as the exercise of such Redemption Rights by the Non-Managing Member or Substituted Member assignor. Notwithstanding the foregoing, each Non-Managing Member may exercise the Redemption Rights after the receipt of a notice of a Liquidating Event;

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(3)No Tendering Party may exercise the Redemption Rights pursuant to Sections 8.6.A and B as to fewer than 3,000 Non-Managing Member Units (unless they constitute all of the Non-Managing Member Units held by such Tendering Party);

(4)No Tendering Party may deliver a Notice of Redemption during the period from December 1 of any year through January 1 of the following year, nor shall any Specified Redemption Date occur during the period from December 21 of any year through January 22 of the following year; and

(5)Each Tendering Party shall pay to the Managing Member the sum of $1,500 as the stipulated and agreed upon reimbursement cost for the Managing Member’s administrative overhead and out-of-pocket costs in connection with such Redemption pursuant to Sections 8.6.A and B.

D.Notwithstanding anything herein to the contrary, with respect to any Redemption pursuant to this Section 8.6:

(1)each Tendering Party shall continue to own all LLC Units subject to any Redemption, and be treated as a Member with respect to such LLC Units for all purposes of this Agreement, until such LLC Units are Transferred to the Company or Managing Member, as the case may be, and paid for or exchanged on the Specified Redemption Date; subject, however, to the provisions of Section 5.7. Until a Specified Redemption Date and an acquisition of the Tendered Units by the Managing Member, if it so elects, pursuant to Sections 8.6.A and B hereof, the Tendering Party shall have no rights as a shareholder of the Managing Member with respect to the REIT Shares issuable in connection with such Redemption; and

(2)the consummation of any Redemption shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended.

E.In connection with an exercise of Redemption Rights pursuant to this Section 8.6, the Tendering Party shall submit the following to the Managing Member, in addition to the Notice of Redemption:

(1)Any information reasonably required by the Managing Member in order to allow it to determine (a) the actual and Constructive Ownership, as determined for purposes of Code Sections 856(a)(6), 856(h), 856(d)(2)(b) and 856(d)(5), of REIT Shares by (i) such Tendering Party and (ii) any Related Party and (b) that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will have actual, Beneficial Ownership or Constructive Ownership of a number of REIT Shares that is in excess of the Ownership Limit;

(2)A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional REIT Shares prior to the closing of the Redemption on the Specified Redemption Date; and

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(3)An undertaking to certify, at and as a condition to the closing of the Redemption that either (a) the actual and Constructive Ownership of REIT Shares by the Tendering Party and any Related Party remain unchanged from that disclosed pursuant to Section 8.6.D(1) or (b) after giving effect to the Redemption, neither the Tendering Party nor any Related Party shall have actual or Constructive Ownership of a number of REIT Shares that is in violation of the Ownership Limit.

ARTICLE IX.
BOOKS, RECORDS, ACCOUNTING AND REPORTS

9.1Records and Accounting

A.The Managing Member shall keep or cause to be kept at the principal office of the Company those records and documents required to be maintained by the Act and other books and records deemed by the Managing Member to be appropriate with respect to the Company’s business, including, without limitation, all books and records necessary to provide to the Members any information, lists and copies of documents required to be provided pursuant to Section 9.3 hereof. Any records maintained by or on behalf of the Company in the regular course of its business may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided that the records so maintained are convertible into clearly legible written form within a reasonable period of time.

B.The books of the Company shall be maintained, for financial and tax reporting purposes, on an accrual basis, and for financial purposes in accordance with GAAP, or on such other basis as the Managing Member determines to be necessary or appropriate. To the extent permitted by sound accounting practices and principles, the Company and the Managing Member may operate with integrated or consolidated accounting records, operations and principles.

9.2Fiscal Year

The Fiscal Year of the Company shall be the calendar year.

9.3Reports

As soon as practicable, but in no event later than 90 days after the close of each Calendar Quarter, the Managing Member shall cause to be mailed to each Member of record as of the last day of the Calendar Quarter, a copy of the general ledger of the Company covering the Calendar Quarter.

9.4Cooperation Regarding Tax Matters Relating to Contributed Properties

A.In connection with the issuance of Non-Managing Member Units to any Contributor or any of such Contributor’s Members, including the issuance of Non-Managing Member Units to the Initial Non-Managing Members upon the contributions of the Contributed Properties to the Company pursuant to the Contribution Agreement, the Non-Managing Member Representative shall deliver, or cause to be delivered, to the Company at or prior to the effective

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date of such issuance, at the Non-Managing Members’ or the Contributors’ sole cost and expense, the following information prepared as of the date of such anticipated contribution.

(1)depreciation and amortization schedules for the assets constituting the Contributed Properties, as kept for both book and tax purposes, showing original basis and accumulated depreciation or amortization;

(2)basis information (computed for both book and tax purposes, if different) for the Contributed Properties and all assets that are components of such Contributed Properties;

(3)the adjusted basis of each Contributor and any constituent partners or members of each Contributor in its interest in the Company; and

(4)calculations of the estimated amounts of gain to be realized and recognized (if any) by each Contributor, as a result of the transactions involving the Contributed Properties in accordance with this Agreement and showing the method by which such amounts are calculated.

B.The Company shall be permitted to rely on the information provided or to be provided to it under this Section 9.4 as to the adjusted tax basis of the Contributed Properties and the relevant depreciation schedules thereto in determining the amount of Built-in Gain on a going forward basis.

C.The Non-Managing Member Representative shall provide or cause each Contributor and each of such Contributor’s Members to provide reasonable assistance to the Company to enable the Company and the Managing Member to determine the Built-in Gain or to prepare their tax returns. The Non-Managing Member Representative shall deliver as promptly as practicable to the Company copies of each Contributor’s final federal, state and local tax returns (including information returns), including associated Schedules K-1, for the tax year in which the contribution of the Contributed Properties occurs, including any amendments thereto, and to notify the Company, in writing, of any audits of such return, or of any audits for other tax years that could affect the amounts shown on the returns for the tax year in which the Closing occurs. Copies of such returns shall be provided to the Company in draft form at least ten (10) days before they are filed, and in final form upon filing. The Non-Managing Member Representative shall also provide, or cause each Contributor to provide, to the Company, promptly upon receipt, any notice that it receives from any of its direct or indirect constituent partners or members (including such Contributor’s Members) that such partner(s) or member(s) intends to prepare its tax returns in a manner inconsistent with the returns filed by such Contributor. The Non-Managing Member Representative understands and agrees that he shall cause the tax returns filed by each Contributor and each of such Contributor’s Members to be substantially consistent with the information provided to the Company pursuant to this Section 9.4.

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ARTICLE X.
TAX MATTERS

10.1Preparation of Tax Returns

The Managing Member shall arrange for the preparation and timely filing of all returns with respect to Company income, gains, deductions, losses and other items required of the Company for federal and state income tax purposes and shall use all commercially reasonable efforts to furnish, within 90 days of the close of each taxable year, the tax information reasonably required by Members for federal and state income tax reporting purposes.

10.2Tax Elections

Except as otherwise provided herein, the Managing Member shall (i) determine whether to make any available election pursuant to the Code, including, without limitation, the election under Section 754 of the Code and (ii) also determine whether to revoke any such election (including, without limitation, any election under Code Sections 754); provided, however, that any such determination by the Managing Member pursuant to this Section 10.2 made prior to the Subsequent Threshold Date shall be made in good faith based upon the best interests of the Members in the aggregate and after the Subsequent Threshold Date in the Managing Member’s sole and absolute discretion.

10.3Tax Matters Partner

A.The Managing Member shall be designated and shall operate as “Tax Matters Partner” (as defined in Code Section 6231), to oversee or handle matters relating to the taxation of the Company; provided, however, that prior to the Subsequent Threshold Date, the approval of the Non-Managing Member Representative (which approval or disapproval shall not be unreasonably withheld or delayed) shall be shall be required to settle any administrative proceeding or institute or settle any litigation with respect to tax issues if such action (a) is reasonably likely to materially and adversely affect the Non-Managing Members in the aggregate, and (b) does not relate to the Managing Member’s tax status as a REIT.

B.Income tax returns of the Company shall be prepared by such certified public accountant(s) as the Managing Member shall retain at the expense of the Company.

10.4Organizational Expenses

The Company shall elect to deduct expenses, if any, incurred by it in organizing the Company ratably as provided in Code Section 709.

ARTICLE XI.
TRANSFERS AND WITHDRAWALS

11.1Transfer

A.No part of the interest of a Member shall be subject to the claims of any creditor, to any spouse for alimony or support, or to legal process, and may not be voluntarily or

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involuntarily alienated or encumbered except as may be specifically provided for in this Agreement.

B.No Membership Interest shall be Transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 11. Any Transfer or purported Transfer of a Membership Interest not made in accordance with this Article 11 shall be null and void ab initio.

11.2Transfer of Managing Member’s Membership Interest

A.Except in connection with a transaction described in Section 11.2.B, the Managing Member shall not withdraw from the Company and shall not Transfer all or any portion of its interest in the Company without the Consent of the Non-Managing Members, which consent shall not be unreasonably withheld; provided, however, that the Managing Member may Transfer all or any portion of its interest in the Company without consent to any Affiliate of the Managing Member, provided that the Managing Member guarantees the obligations of such Affiliate under this Agreement (the “Managing Member Guarantee”). Upon any Transfer of the Membership Interest of the Managing Member in accordance with the provisions of this Section 11.2, the transferee shall become a Substitute Managing Member for all purposes herein, and shall be vested with the powers and rights of the transferor Managing Member, and shall be liable for all obligations and responsible for all duties of the Managing Member, once such transferee has executed such instruments as may be necessary to effectuate such admission and to confirm the agreement of such transferee to be bound by all the terms and provisions of this Agreement with respect to the Membership Interest so acquired. It is a condition to any Transfer otherwise permitted hereunder that the transferee assumes, by operation of law or express agreement, all of the obligations of the transferor Managing Member under this Agreement with respect to such Transferred Membership Interest, and such Transfer shall relieve the transferor Managing Member of its obligations under this Agreement accruing subsequent to the date of such Transfer except for the Managing Member Guarantee. In the event the Managing Member withdraws from the Company, in violation of this Agreement or otherwise, or otherwise dissolves or terminates, or upon the Incapacity of the Managing Member, all of the remaining Members may elect to continue the Company business by selecting a Substitute Managing Member in accordance with the Act.

B.The Managing Member shall not engage in any merger, consolidation or other combination with or into another person, sale of all or substantially all of its assets or any reclassification, or change of its outstanding equity interests through a restructuring, recapitalization, reclassification or otherwise (a “Termination Transaction”), unless either (i) the Termination Transaction has been approved by the Consent of the Non-Managing Members or (ii) in connection with the Termination Transaction, all holders of LLC Units (other than the Managing Member) either will receive for each LLC Unit, or will be entitled to receive, for each LLC Unit (in lieu of the REIT Shares Amount) upon a Redemption of the LLC Unit pursuant to Section 8.6 hereof, an amount of cash, securities, or other property equal to the amount that would have been paid to the holder had the LLC Unit been redeemed for REIT Shares pursuant to Section 8.6 hereof immediately prior to the consummation of the Termination Transaction subject, in the event of a Redemption of the LLC Unit pursuant to Section 8.6 hereof subsequent to the consummation of the Termination Transaction, to further adjustment to the

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extent provided in this Agreement to compensate for such effect of certain transactions described herein; provided, however, that, if, in connection with the Termination Transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than fifty percent (50%) of the outstanding REIT Shares, each Member shall receive, or shall have the right to elect to receive, the greatest amount of cash, securities, or other property which such Member would have received had Redeemed its LLC Units for REIT Shares pursuant to Section 8.6 immediately prior to the expiration of such purchase, tender or exchange offer and had thereupon accepted such purchase, tender or exchange offer. No provision of this Agreement, including, without limitation, the provisions of Section 7.3.B hereof, shall prohibit the consummation of any Termination Transaction permitted by the provisions of this Section 11.2.B.

11.3Non-Managing Members’ Rights to Transfer

A.General. No Non-Managing Member shall Transfer all or any portion of its Membership Interest, or any of such Non-Managing Member’s economic rights as a Non-Managing Member, to any transferee without first offering such Membership Interest to the Managing Member or otherwise obtaining the consent of the Managing Member, which consent may be withheld in its sole and absolute discretion; provided, however, that notwithstanding the foregoing or any other provisions of this Agreement, any Non-Managing Member may, without the consent of the Managing Member, (x) pledge all or any portion of its Membership Interest to a lender to such Member to secure indebtedness to such lender and Transfer such Membership Interest to such lender upon foreclosure of the debt secured by such Membership Interest, so long as any such pledge or other Transfer would not otherwise violate the provisions of this Agreement, (y) transfer all or any portion of its Membership Interest or economic rights as a Non-Managing Member to a partner in such Non-Managing Member in liquidation of such partner’s interest in such Non-Managing Member, to a family member of such Non-Managing Member, a trust all of the beneficiaries of which are such Non-Managing Member and family members of such Non-Managing Member, a corporation, general or limited partnership or limited liability company all of the owners of which are such Non-Managing Member and family members of such Non-Managing Member or to an organization described in Sections 170(b)(1)(A), 170(c)(2) or 501(c)(3) of the Code, so long as any such Transfer would not otherwise violate the provisions of this Agreement (herein, a “Permitted Non-Managing Member Assignment”), and in connection with any Permitted Non-Managing Member Assignment, such Non-Managing shall reimburse to Managing Member all actual out-of-pocket costs and expenses in connection with such Permitted Non-Managing Member Assignment, including, without limitation, attorneys’ fees and costs and any other expenses incurred by Managing Member, including the costs of filing any amendment or prospectus supplement to any registration statement or prospectus as necessary to reflect such Transfer. In addition, it is understood and agreed that the transferee pursuant to any Permitted Non-Managing Member Assignment shall only become an Assignee and not a Substituted Member, unless otherwise consented to by the Managing Member in its sole and absolute discretion.

B.Conditions to Transfer. It is a condition to any Transfer otherwise permitted hereunder that the transferee assume by operation of law or express agreement all of the obligations of the transferor Member under this Agreement with respect to such Transferred Membership Interest, and that the Managing Member be reimbursed for all actual out-of-pocket

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costs and expenses incurred by the Managing Member in connection with such Transfer, including, without limitation, attorneys’ fees and costs and any other expenses incurred by Managing Member, including the costs of filing any amendment or prospectus supplement to any registration statement or prospectus as necessary to reflect such Transfer. Notwithstanding the foregoing, any transferee of any Transferred Membership Interest shall be subject to the Ownership Limits and any and all ownership limitations contained in the Charter. Any transferee, whether or not admitted as a Substituted Member, shall take subject to the obligations of the transferor hereunder. Unless admitted as a Substituted Member, no transferee, whether by a voluntary Transfer, by operation of law or otherwise, shall have any rights hereunder, other than the rights of an Assignee as provided in Section 11.5 hereof.

C.Incapacity. If a Non-Managing Member is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Non-Managing Member’s estate shall have all the rights of a Non-Managing Member, but not more rights than those enjoyed by other Non-Managing Members, for the purpose of settling or managing the estate, and such power as the Incapacitated Non-Managing Member possessed to Transfer all or any part of its interest in the Company. The Incapacity of a Non-Managing Member, in and of itself, shall not dissolve or terminate the Company.

D.Opinion of Counsel. In connection with any Transfer of a Membership Interest, the Managing Member shall have the right to receive an opinion of counsel reasonably satisfactory to it to the effect that the proposed Transfer may be effected without registration under the Securities Act and will not otherwise violate any federal or state securities laws or regulations applicable to the Company or the Membership Interests Transferred. If, in the opinion of such counsel, such Transfer would require the filing of a registration statement under the Securities Act or would otherwise violate any federal or state securities laws or regulations applicable to the Company or the LLC Units, the Managing Member may prohibit any Transfer by a Member of Membership Interests otherwise permitted under this Section 11.3.

E.Transfers to Lenders. No Transfer of any LLC Units may be made to a lender to the Company or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Company whose loan constitutes a Nonrecourse Liability, without the consent of the Managing Member, in its sole and absolute discretion; provided that, as a condition to such consent, the lender will be required to enter into an arrangement with the Company and the Managing Member to redeem or exchange for the REIT Shares Amount any LLC Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a member in the Company for purposes of allocating liabilities to such lender under Code Section 752.

11.4Substituted Members

A.No Member shall have the right to substitute a transferee (including any transferees pursuant to Transfers permitted by Section 11.3 hereof) as a Member in its place. The Managing Member shall, however, have the right to consent to the admission of a transferee of the interest of a Member pursuant to this Section 11.4 as a Substituted Member, which consent may be given or withheld by the Managing Member in its sole and absolute discretion. The Managing Member’s failure or refusal to permit a transferee of any such interests to become a

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Substituted Member shall not give rise to any cause of action against the Company or any Member.

B.A transferee who has been admitted as a Substituted Member in accordance with this Article 11 shall have all the rights and powers and be subject to all the restrictions and liabilities of a Member under this Agreement. The admission of any transferee as a Substituted Member shall be subject to the transferee executing and delivering to the Company an acceptance of all of the terms and conditions of this Agreement (including without limitation, the provisions of Section 2.4 and such other documents or instruments as may be required to effect the admission).

C.Upon the admission of a Substituted Member, the Managing Member shall amend Exhibit A to reflect the name, address, Capital Account, number of LLC Units and Percentage Interest of such Substituted Member and to eliminate or adjust, if necessary, the name, address, Capital Account, number of LLC Units and Percentage Interest of the predecessor of such Substituted Member (and any other Member, as necessary).

11.5Assignees

If the Managing Member, in its sole and absolute discretion, does not consent to the admission of any permitted transferee under Section 11.3 hereof as a Substituted Member, as described in Section 11.4 hereof, such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be entitled to all the rights of an assignee of a limited liability company interest under the Act, including the right to receive distributions from the Company and the share of Net Income, Net Loss and other items of income, gain, loss, deduction and credit of the Company attributable to the LLC Units assigned to such transferee, the rights to Transfer the LLC Units provided in this Article 11, and the right of Redemption provided in Section 8.6, but shall not be deemed to be a Member of LLC Units for any other purpose under this Agreement, and shall not be entitled to effect a Consent or vote with respect to such LLC Units on any matter presented to the Members for approval (such right to Consent or vote, to the extent provided in this Agreement or under the Act, fully remaining with the transferor Member). In the event that any such transferee desires to make a further assignment of any such LLC Units, such transferee shall be subject to all the provisions of this Article 11 to the same extent and in the same manner as any Members desiring to make an assignment of LLC Units. The Managing Member shall have no liability under any circumstance with respect to any Assignee as to which it does not have notice.

11.6General Provisions

A.No Non-Managing Member may withdraw from the Company other than (i) as a result of a permitted Transfer of all of such Non-Managing Member’s LLC Units in accordance with this Article 11 and the transferee(s) of such LLC Units being admitting to the Company as a Substituted Member or (ii) pursuant to a Redemption by the Non-Managing Member of all of its LLC Units under Section 8.6 hereof.

B.Any Non-Managing Member who shall Transfer all of its LLC Units in a Transfer (i) permitted pursuant to this Article 11 where such transferee was admitted as a

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Substituted Member; (ii) pursuant to the exercise of its rights to effect a Redemption of all of its LLC Units under Section 8.6 hereof; (iii) pursuant to a Reduction; or (iv) pursuant to a combination of Transfers of the types specified in the foregoing (i) - (iii), shall cease to be a Member.

C.Transfers pursuant to this Article 11 may only be made on the first day of a Calendar Quarter of the Company, unless the Managing Member otherwise agrees.

D.All distributions of Available Cash attributable to an LLC Unit with respect to which the LLC Record Date is before the date of a Transfer or a Redemption of the LLC Unit shall be made to the transferor Member and all distributions of Available Cash thereafter attributable to such LLC Unit shall be made to the transferee Member.

E.Notwithstanding anything to the contrary set forth herein, in addition to any other restrictions on Transfer herein contained, in no event may any Transfer or assignment of a Membership Interest by any Member (including any redemption or any Redemption or any other acquisition of LLC Units by the Company) be made:

(1)to any person or entity who lacks the legal right, power or capacity to own a Membership Interest;

(2)in violation of applicable law;

(3)without the consent of the Managing Member, if such Transfer would, in the opinion of counsel to the Company or the Managing Member, cause an increased tax liability to any other Member or Assignee as a result of the termination of the Company, in either case for federal or state income or franchise tax purposes (except in the case of a Terminating Capital Transaction or as a result of the Redemption of all LLC Units pursuant to Section 8.6);

(4)without the consent of the Managing Member, if such Transfer could, as reasonably determined by the Managing Member, (i) result in the Company being treated as an association taxable as a corporation for federal income tax or for state income or franchise tax purposes, (ii) adversely affect the ability of the Managing Member to continue to qualify as a REIT or subject the Managing Member to any additional taxes under Code Section 857 or Code Section 4981 or (iii) be treated as having been effectuated through an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Code Section 7704, or such Transfer fails to satisfy a “safe-harbor” preventing such treatment (as set forth in Treasury Regulations under Code Section 7704 or any successor provision);

(5)if such Transfer could cause the Company to become, with respect to any employee benefit plan subject to Title I of ERISA, a “party-in-interest” (as defined in ERISA Section 3(14)) or a “disqualified person” (as defined in Code Section 4975(c));

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(6)if such Transfer could, in the opinion of legal counsel to the Company, cause any portion of the assets of the Company to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.2-101;

(7)if such Transfer could cause the Company (as opposed to the Managing Member) to become a reporting company under the Exchange Act;

(8)if such Transfer could subject the Company to regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA, each as amended; or

(9)without the consent of the Managing Member, which may be granted or withheld in its sole and absolute discretion, if such Transfer could result in the Company having more than 100 Members (including as Members those persons indirectly owning an interest in the Company through a partnership, limited liability company, S corporation or grantor trust (such entity, a “flow through entity”), but only if substantially all of the value of such person’s interest in the flow through entity is attributable to the flow through entity’s interest (direct or indirect) in the Company) (the “One Hundred Member Limit”).

F.No Non-Managing Member will take or allow any Affiliate to take any action that would cause a violation of the One Hundred Member Limit.

ARTICLE XII.
ADMISSION OF MEMBERS

12.1Admission of Initial Non-Managing Members

Upon the contribution of the Contributed Properties to the Company, each Contributor, to the extent it receives Non-Managing Member Units, shall be admitted to the Company as an Initial Non-Managing Member. Each Contributor, in lieu of receiving the number of Non-Managing Member Units otherwise issuable to it pursuant to the Contribution Agreement, may instruct the Managing Member to issue the Non-Managing Member Units to Contributor’s Members so long as (i) Contributor certifies to the Managing Member that the Contributor’s right to receive the Non-Managing Member Units has been distributed to the Contributor’s Members in accordance with the limited liability company, partnership agreement or other organizational documents of the Contributor, (ii) each of the Contributor’s Members executes (A) a Joinder Agreement as a Non-Managing Member, (B) an Accredited Investor Certificate in form and substance reasonably acceptable to the Managing Member or as otherwise required by the Contribution Agreement; and (C) a Registration Rights Agreement.

12.2Admission of Successor Managing Member

A successor to all of the Managing Member’s Membership Interest pursuant to Section 11.2 hereof who is proposed to be admitted as a successor Managing Member shall be admitted to the Company as the Managing Member, effective immediately upon such Transfer. Any such successor shall carry on the business of the Company without dissolution. In each case, the admission shall be subject to the successor Managing Member executing and delivering

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to the Company an acceptance of all of the terms, conditions and applicable obligations of this Agreement and such other documents or instruments as may be required to effect the admission in Section 11.2.C hereof.

12.3Admission of Additional Members

A.A Person (other than an existing Member) who makes a Capital Contribution to the Company in accordance with this Agreement shall be admitted to the Company as an Additional Member, only upon furnishing to the Managing Member (i) evidence of acceptance, in form and substance satisfactory to the Managing Member, of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof, and (ii) such other documents or instruments as may be required in the sole and absolute discretion of the Managing Member in order to effect such Person’s admission as an Additional Member.

B.Notwithstanding anything to the contrary in this Agreement, no Person shall be admitted as an Additional Member without the Consent of the Non-Managing Members and the consent of Managing Member, which consent may be given or withheld by each Member in its sole and absolute discretion. The admission of any Person as an Additional Member shall become effective on the date upon which the name of such Person is recorded on the books and records of the Company, following the Consent of Non-Managing Members and the Consent of the Managing Member to such admission.

C.If any Additional Member is admitted to the Company on any day other than the first day of a Fiscal Year, then Net Income, Net Loss, each item thereof and all other items of income, gain, loss, deduction and credit allocable among Members and Assignees for such Fiscal Year shall be allocated among such Additional Member and all other Members and Assignees by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), using the “interim closing of the books” method or another permissible method selected by the Managing Member. Solely for purposes of making such allocations, each of such items for the calendar month in which an admission of any Additional Member occurs shall be allocated among all the Members and Assignees including such Additional Member, in accordance with the principles described in Section 11.6.C hereof. All distributions of Available Cash with respect to which the LLC Record Date is before the date of such admission shall be made solely to Members and Assignees other than the Additional Member, and all distributions of Available Cash thereafter shall be made to all the Members and Assignees including such Additional Member.

12.4Amendment of Agreement and Certificate

For the admission to the Company of any Member, the Managing Member shall take all steps necessary and appropriate under the Act to amend the records of the Company and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment of Exhibit A) and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 2.4 hereof.

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12.5Limitation on Admission of Members

No Person shall be admitted to the Company as a Substituted Member or an Additional Member if, in the opinion of legal counsel for the Company, it would result in the Company being treated as a corporation for federal income tax purposes or otherwise cause the Company to become a reporting company under the Exchange Act.

ARTICLE XIII.
DISSOLUTION, LIQUIDATION AND TERMINATION

13.1Dissolution

The Company shall not be dissolved by the admission of Substituted Members or Additional Members or by the admission of a successor Managing Member in accordance with the terms of this Agreement. Upon the withdrawal of the Managing Member, any successor Managing Member shall continue the business of the Company without dissolution. However, the Company shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following (each a “Liquidating Event”):

A.an event of withdrawal of the Managing Member, as defined in the Act (other than an event of bankruptcy), unless, within 90 days after the withdrawal, a Majority of Remaining Members agree in writing to continue the business of the Company and to the appointment, effective as of the date of withdrawal, of a substitute Managing Member;

B.subject to the provisions of Sections 7.3.E and 7.3H hereof, an election to dissolve the Company made by the Managing Member;

C.entry of a decree of judicial dissolution of the Company pursuant to the provisions of the Act;

D.subject to the provisions of Sections 7.3.E and 7.3H hereof, the sale of all or substantially all of the assets and properties of the Company;

E.subject to the provisions of Sections 7.3.E and 7.3H hereof, a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the Managing Member is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the Managing Member, in each case under any Bankruptcy Law as now or hereafter in effect, unless prior to or within 90 days after the entry of such order or judgment a Majority of Remaining Members Consent in writing to continue the business of the Company and to the appointment, effective as of a date prior to the date of such order or judgment, of a substitute Managing Member;

F.the Incapacity of the Managing Member, unless prior to or within 90 days after such Incapacity a Majority of Remaining Members agree in writing to continue the business of the Company and to the appointment, effective as of a date prior to the date of such Incapacity, of a substitute Managing Member; or

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G.the Redemption of all LLC Units (other than those held by the Managing Member).

13.2Redemption of Non-Managing Member Units

Notwithstanding anything in this Agreement to the contrary, on or after such time as the Managing Member has the right to dissolve the Company, or at any time with respect to Members that are an organization described in Sections 170(b)(1)(A), 170(c)(2) or 501(c)(3) of the Code, the Managing Member may, in its sole and absolute discretion, require each Non-Managing Member (by delivering a Call Notice to such Non-Managing Member) to tender all of its Non-Managing Member Units to the Managing Member in exchange for, at the election of and in the sole and absolute discretion of the Managing Member, either (i) an amount of cash equal to the sum of (a) the Cash Amount and (b) the NMM Sharing Amount, calculated as if all of the Contributed Property then owned by the Company were sold in a taxable transaction at their fair market values, or (ii) a number of REIT Shares equal to the sum of (a) the REIT Shares Amount payable on the Specified Redemption Date and otherwise in accordance with the procedures and provisions set forth in Sections 8.6.A and B, and (b) a number of REIT Shares with a value equal to the amount set forth in Section 13.2(i)(b).

13.3Winding Up

A.Upon the occurrence of a Liquidating Event, the Company shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets and satisfying the claims of its creditors and Members. After the occurrence of a Liquidating Event, no Member shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Company’s business and affairs. The Managing Member (or, in the event that there is no remaining Managing Member, any Person elected by a Majority in Interest of the Non-Managing Members (the Managing Member or such other Person being referred to herein as the “Liquidator”)) shall be responsible for overseeing the winding up and dissolution of the Company and shall take full account of the Company’s liabilities and property, and the Company property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the Managing Member, include shares of stock in the Managing Member) shall be applied and distributed in the following order:

(1)First, to the satisfaction of all of the Company’s debts and liabilities to creditors other than the Members and their Assignees (whether by payment or the making of reasonable provision for payment thereof);

(2)Second, to the satisfaction of all of the Company’s debts and liabilities to the Members, including, but not limited to, any loan made to the Company by a Member in accordance with the terms of this Agreement (whether by payment or the making of reasonable provision for payment thereof);

(3)The balance, if any, in proportion to the Member’s positive Capital Account balances, after giving effect to all contributions, distributions and allocations for all periods.

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The Managing Member shall not receive any compensation for any services performed pursuant to this Article 13.

B.Notwithstanding the provisions of Section 13.3.A hereof that require liquidation of the assets of the Company, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Company the Liquidator determines that an immediate sale of part or all of the Company’s assets would be impractical or would cause undue loss to the Members, the Liquidator may defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Company (including to those Members as creditors) and/or distribute to the Members, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.3.A hereof, undivided interests in such Company assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Members, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.

C.In the event that the Company is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article 13 to the Members and Assignees that have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2) to the extent of, and in proportion to, their positive Capital Account balances. If any Member has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Member shall have no obligation to make any contribution to the capital of the Company with respect to such deficit, and such deficit shall not be considered a debt owed to the Company or to any other Person for any purpose whatsoever. A pro rata portion of the distributions that would otherwise be made to the Members pursuant to this Article 13 may be withheld or escrowed to provide a reasonable reserve for Company liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Company, provided that such withheld or escrowed amounts shall be distributed to the Members in the manner and order of priority set forth in Section 13.3.A hereof as soon as practicable.

13.4Deemed Contribution and Distribution

Notwithstanding any other provision of this Article 13, in the event that the Company is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Company’s Property shall not be liquidated, the Company’s liabilities shall not be paid or discharged and the Company’s affairs shall not be wound up. Instead, for federal and state income tax purposes, the Company shall be deemed to have contributed its assets and liabilities to a new limited liability company in exchange for an interest in such new limited liability company and, immediately thereafter, the Company will be deemed to liquidate by distributing interests in the new limited liability company to the Members.

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13.5Rights of Members

Except as otherwise provided in this Agreement, (a) each Member shall look solely to the assets of the Company for the return of its Capital Contribution, (b) no Member shall have the right or power to demand or receive property other than cash from the Company and (c) except as provided in this Agreement, no Member shall have priority over any other Member as to the return of its Capital Contributions, distributions or allocations.

13.6Notice of Dissolution

In the event that a Liquidating Event occurs or an event occurs that would, but for an election or objection by one or more Members pursuant to Section 13.1 hereof, result in a dissolution of the Company, the Managing Member shall, within 30 days thereafter, provide written notice thereof to each of the Members and, in the Managing Member’s sole and absolute discretion or as required by the Act, to all other parties with whom the Company regularly conducts business (as determined in the sole and absolute discretion of the Managing Member), and the Managing Member may, or, if required by the Act, shall, publish notice thereof in a newspaper of general circulation in each place in which the Company regularly conduct business (as determined in the sole and absolute discretion of the Managing Member).

13.7Cancellation of Certificate

Upon the completion of the liquidation of the Company’s cash and property as provided in Section 13.3 hereof, the Company shall be terminated and the Certificate and all qualifications of the Company as a foreign limited liability company in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Company shall be taken.

13.8Reasonable Time for Winding-Up

A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Company and the liquidation of its assets pursuant to Section 13.3 hereof, in order to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect between the Members during the period of liquidation.

13.9Liability of Liquidator

The Liquidator shall be indemnified and held harmless by the Company from and against any and all claims, liabilities, costs, damages, and causes of action of any nature whatsoever arising out of or incidental to the Liquidator’s taking of any action authorized under or within the scope of this Agreement; provided, however, that the Liquidator shall not be entitled to indemnification, and shall not be held harmless, where the claim, demand, liability, cost, damage or cause of action at issue arises out of (i) a matter entirely unrelated to the Liquidator’s action or conduct pursuant to the provisions of this Agreement or (ii) the proven willful misconduct or gross negligence of the Liquidator.

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ARTICLE XIV.
PROCEDURES FOR ACTIONS AND CONSENTS
OF MEMBERS; AMENDMENTS; MEETINGS

14.1Procedures for Actions and Consents of Members

The actions requiring consent or approval of Non-Managing Members pursuant to this Agreement, including Section 7.3 hereof, or otherwise pursuant to applicable law, are subject to the procedures set forth in this Article 14 and shall require the Consent of the Non-Managing Members unless a different standard or percentage is expressly required by this Agreement for the action in question.

14.2Amendments

Except for amendments to Exhibit A as provided in Sections 7.3.C, 11.4.C and 12.3 hereof, amendments to this Agreement may be proposed by the Managing Member or by a Majority in Interest of the Non-Managing Members. Following such proposal, the Managing Member shall submit any proposed amendment to the Members. The Managing Member shall seek the written Consent of the Members on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that the Managing Member may deem appropriate. The affirmative vote or consent, as applicable, of a Majority in Interest of the Non-Managing Members and the Managing Member is required for the approval of a proposed amendment. For purposes of obtaining a written consent, the Managing Member may require a response within a reasonable specified time, but not less than 15 days, and failure to respond in such time period shall constitute a consent that is consistent with the Managing Member’s recommendation with respect to the proposal; provided, however, that an action shall become effective at such time as requisite consents are received even if prior to such specified time.

14.3Meetings of the Members

A.Meetings of the Members may be called by the Managing Member and shall be called upon the receipt by the Managing Member of a written request by a Majority in Interest of the Non-Managing Members. The call shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Members not less than seven days nor more than 30 days prior to the date of such meeting. The meeting shall be held at the headquarters office of the Managing Member or at such other location as may be designated by the Managing Member. Members may vote in person or by proxy at such meeting. Whenever the vote or Consent of Members is permitted or required under this Agreement, such vote or Consent may be given at a meeting of Members or may be given in accordance with the procedure prescribed in Section 14.3.B hereof.

B.Any action required or permitted to be taken at a meeting of the Members may be taken without a meeting if a written consent setting forth the action so taken is signed by Members holding a majority of the LLC Units (or such other percentage as is expressly required by this Agreement for the action in question). Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of Members holding a majority of the LLC Units (or such other percentage as is expressly required by this Agreement).

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Such consent shall be filed with the Managing Member. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified.

C.Each Member may authorize any Person or Persons to act for it by proxy on all matters in which a Member is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Member or its attorney-in-fact. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy (or there is receipt of a proxy authorizing a later date). Every proxy shall be revocable at the pleasure of the Member executing it, such revocation to be effective upon the Company’s receipt of written notice of such revocation from the Member executing such proxy.

D.Each meeting of Members shall be conducted by the Managing Member or such other Person as the Managing Member may appoint pursuant to such rules for the conduct of the meeting as the Managing Member or such other Person deems appropriate in its reasonable discretion. Without limitation, meetings of Members may be conducted in the same manner as meetings of the Managing Member’s shareholders and may be held at the same time as, and as part of, the meetings of the Managing Member’s shareholders.

ARTICLE XV.
GENERAL PROVISIONS

15.1Addresses and Notice

Any notice, demand, request or report required or permitted to be given or made to a Member or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication (including by telecopy, facsimile, or commercial courier service) (i) in the case of a Member, to that Member at the address set forth in Exhibit A or such other address of which the Member shall notify the Managing Member in writing and (ii) in the case of an Assignee, to the address of which such Assignee shall notify the Managing Member in writing.

15.2Titles and Captions

All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to “Articles” or “Sections” are to Articles and Sections of this Agreement.

15.3Pronouns and Plurals

Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

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15.4Further Action

The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

15.5Binding Effect

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

15.6Creditors

Other than as expressly set forth herein with respect to Indemnitees, none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Company.

15.7Waiver

A.No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.

15.8Counterparts

This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart.

15.9Applicable Law

This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. In the event of a conflict between any provision of this Agreement and any non-mandatory provision of the Act, the provisions of this Agreement shall control and take precedence.

15.10Entire Agreement

This Agreement, the Contribution Agreement and the other agreements executed on the Effective Date as provided in the Contribution Agreement contain all of the understandings and agreements between and among the Members with respect to the subject matter of this Agreement and the rights, interests and obligations of the Members with respect to the Company.

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15.11Invalidity of Provisions

If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

15.12No Partition

No Member nor any successor-in-interest to a Member shall have the right while this Agreement remains in effect to have any property of the Company partitioned, or to file a complaint or institute to any proceeding at law or in equity to have such property of the Company partitioned, and each Member, on behalf of itself and its successors and assigns hereby waives any such right. It is the intention of the Members that the rights of the parties hereto and their successors-in-interest to Company property, as among themselves, shall be governed by the terms of this Agreement, and that the rights of the Members and their successors-in-interest shall be subject to the limitations and restrictions as set forth in this Agreement.

15.13Non-Managing Member Representative

A.All actions taken by the Non-Managing Member Representative pursuant to those provisions of this Agreement which authorize the Non-Managing Member Representative to so act shall be binding upon all Non-Managing Members as if they had individually taken such action and each Non-Managing Member, by entering into or agreeing to be bound by the provisions of this Agreement, authorize the Non-Managing Member Representative to take such actions on his, her or its behalf and agree that the actions so taken shall be binding upon him, her or it to the same extent as if he, she or it had taken the action directly.

B.The holders of a majority of the outstanding Non-Managing Members Units shall be entitled to replace the Non-Managing Member Representative by delivering to the Managing Member a written notice signed by the holders of a majority of the outstanding Non-Managing Members Units stating (i) that the notice is being provided to the Managing Member pursuant to this Section 15.13.B, (ii) that the Members signing the notice own of record on the books of the Company a majority of the outstanding Non-Managing Members Units, (iii) that the Members signing the notice desire to replace the person then serving as the Non-Managing Member Representative with the person named in the notice, and (iv) specifying the date on which the appointment of the named individual to replace the then serving Non-Managing Member Representative shall be effective (which shall be a date not earlier than the fourteenth day after the date on which the notice shall have been delivered to the Managing Member). The appointment of the new Non-Managing Member Representative specified in the notice shall be effective on the date specified in the notice and upon effectiveness, the individual previously serving as the Non-Managing Member Representative shall cease to be entitled to act in that capacity under this Agreement.

15.14Uniform Commercial Code Article 8 (Opt-In)

The Company hereby irrevocably elects that all LLC Units shall be securities governed by Article 8 of the Uniform Commercial Code as in effect in the State of Delaware and each other applicable jurisdiction. Each certificate evidencing LLC Units in the Company shall

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bear the following legend:  “This certificate evidences an interest in HCP DR California, LLC and shall be a security governed by Article 8 of the Uniform Commercial Code as in effect in the State of Delaware and, to the extent permitted by applicable law, each other applicable jurisdiction.”  This provision shall not be amended, and any purported amendment to this provision shall be null and void.

[Signatures appear on following page]

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IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the date first written above.

MANAGING MEMBER:	HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation
	By:	/s/ Stephen R. Maulbetsch
	Name:				Stephen R. Maulbetsch
	Title:			Executive Vice President
NON-MANAGING MEMBERS:	HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation
	By:		/s/ Stephen R. Maulbetsch
	Name:					Stephen R. Maulbetsch
	Title:			Executive Vice President
	/s/ William P. Gallaher
	William P. Gallaher, Trustee for the William P. & Cynthia J. Gallaher Trust
	/s/ Dwayne J. Clark
	Dwayne J. Clark, an individual
[See Additional Signature Pages of Non-Managing Members Attached hereto]

S-1

[Additional Signatures of Non-Managing Members to
Amended and Restated Limited Liability Company Agreement

of HCP DR California, LLC]

POWER OF ATTORNEY

This Agreement has been signed by each of the following persons as a Non-Managing Member in the capacities and on the dates indicated:

Signature	Title	Date
*
Patrick R. Gallaher, Trustee for the Patrick R. & Cynthia M. Gallaher Trust	Trustee	July 22, 2005
*
Jeffrey D. Civian, Trustee for the Jeffrey D. Civian Trust dated August 8, 1986	Trustee	July 22, 2005
*	Individual	July 22, 2005
Jeffrey Meyer
*	Individual	July 22, 2005
Steven L. Gallaher
*	Individual	July 22, 2005
Richard Coombs
*	Individual	July 22, 2005
Larry L. Wasem
*
Joseph H. Ward, Jr., Trustee for the Joseph H. Ward, Jr. and Pamela K. Ward Trust	Trustee	July 22, 2005
*	Individual	July 22, 2005
Borue H. O’Brien
*	Individual	July 22, 2005
William R. Mabry
*
Charles N. Elsbree, Trustee for the Charles N. Elsbree Jr. Living Trust dated February 14, 2002	Trustee	July 22, 2005

S-2

Signature		Title	Date
*		Individual	July 22, 2005
Gary A. Robinson
*		Trustee	July 22, 2005
Thomas H. Persons, Trustee for the Persons Family Revocable Trust under trust dated February 15, 2005
*		Individual	July 22, 2005
Glen Hammel
*		Individual	July 22, 2005
Marilyn E. Montero
*		Trustee	July 22, 2005
Joseph G. Lin, Trustee for the Lin Revocable Living Trust
*		Individual	July 22, 2005
Ned B. Stein
*		Trustee	July 22, 2005
John Gladstein, Trustee for the John & Andrea Gladstein Family Trust dated February 11, 2003
*		Trustee	July 22, 2005
Francis Connelly, Trustee for the Francis J. & Shannon A. Connelly Trust
*		Trustee	July 22, 2005
Al Coppin, Trustee for the Al Coppin Trust
*		Trustee	July 22, 2005
Stephen B. McCullagh, Trustee for the Stephen B. & Pamela McCullagh Trust dated October 22, 2001
*		Trustee	July 22, 2005
Larry L. Wasem – SEP IRA
*By:	/s/ William P. Gallaher
William P. Gallaher Attorney-in-fact

S-3

EXHIBIT A

MEMBERS CAPITAL CONTRIBUTIONS

[See Pages A-2 and A-3 attached hereto]

A-1

EXHIBIT A-2

CONTRIBUTOR CONTRIBUTIONS

Part I: Contributors

Contributor	Contributed Properties	Gross Asset Value of Contribution		Net Asset Value of Contribution		Unit Value		Number of Non-Managing Member Units (1)
Aegis of Pleasant Hill LLC	Aegis of Pleasant Hill	$	20,000,000	$	4,335,801	$	27.30	158,821
Aegis of Dana Point LLC	Aegis of Dana Point	$	18,800,000	$	3,827,378	$	27.30	140,197
Aegis of Granada Hills LLC	Aegis of Granada Hills	$	21,500,000	$	7,874,908	$	27.30	288,458
OakmontSL of Concord, L.P.	Aegis of Concord	$	37,900,709	$	8,488,494	$	27.30	310,934
Total		$	98,200,709	$	24,526,581	$	27.30	898,410

(1) See Part II (Exhibit A-3) for a breakout by individual Non-Managing Members and their respective allocations

Exhibit A-3

LLC Units (Non-Managing Member and Managing Member)

Non-Managing Member Units

		Aegis of Pleasant Hill			Aegis of Dana Point			Aegis of Granada Hills			Aegis of Concord			Total
Name	Address	% Interest		# of Units	% Interest		# of Units	% Interest		# of Units	% Interest		# of Units	# of Units
William P. Gallaher, Trustee for the William P. & Cynthia J.	220 Concourse Blvd. Santa Rosa, CA 95403	23.944	%	38,027	23.944	%	33,569	23.944	%	69,068	39.705	%	123,455	264,119
Dwayne J. Clark	18200 NE Union Hill Rd. Suite 110 Redmond, WA 98052	6.868	%	10,908	6.868	%	9,629	6.868	%	19,812			—	40,349
Patrick R. Gallaher, Trustee for the Patrick R. & Cynthia M.	531 Sauvignon Place Windsor, CA 95492	13.097	%	20,800	13.097	%	18,361	13.097	%	37,778			—	76,939
Jeffrey D. Civian, Trustee for the Jeffrey D. Civian Trust	3375 Montecito Lane Santa Rosa, CA 95404	11.614	%	18,445	11.614	%	16,282	11.614	%	33,500			—	68,227
Jeffrey Meyer	8335 Starr Rd. Windsor, CA 95492	2.846	%	4,520	2.866	%	4,018	2.866	%	8,268			—	16,806
Steven L. Gallaher	2 Rutland Ct. Alameda, CA 94502	3.485	%	5,535	3.485	%	4,886	3.485	%	10,052	3.161	%	9,828	30,301
Richard Coombs	9982 Troon Ct. Windsor, CA 95492	4.687	%	7,444	4.687	%	6,571	4.687	%	13,521			—	27,536
Larry L. Wasem	414 Aviation Blvd. Santa Rosa, CA 95403	4.365	%	6,933	4.365	%	6,120	4.365	%	12,591			—	25,644
Joseph H. Ward, Trustee for the Joseph H. Ward, Jr. and	2170 Grace Dr. Santa Rosa, CA 95404	2.612	%	4,149	2.612	%	3,662	2.612	%	7,535			—	15,346
Borue H. O’Brien	200 Queens Lane Petaluma, CA 94952	2.711	%	4,306	2.711	%	3,801	2.711	%	7,821			—	15,928
William R. Mabry	6840 Giovanetti Rd. Forestville, CA 95436	0.767	%	1,217	0.767	%	1,075	0.767	%	2,211	1.583	%	4,922	9,425
Charles N. Elsbree, Trustee for the Charles N. Elsbree Jr.	P.O. Box 867 Windsor, CA 95492	1.815	%	2,883	1.815	%	2,545	1.815	%	5,237			—	10,665
Gary A. Robinson	6171 Anderson Rd. Forestville, CA 95436	1.761	%	2,797	1.761	%	2,469	1.761	%	5,080			—	10,346
Thomas H. Persons, Trustee for the Persons Family	500 Washington St. Suite 700 San Francisco, CA 94111	0.379	%	603	0.379	%	532	0.379	%	1,095			—	2,230
Glen Hammel	3540 Mono Place Davis, CA 95616	0.690	%	1,096	0.690	%	967	0.690	%	1,991			—	4,054
Marilyn E. Montero	6171 Anderson Rd. Forestville, CA 95436	0.363	%	577	0.363	%	509	0.363	%	1,047			—	2,133
Joseph G. Lin, Trustee for The Lin Revocable Living Trust	220 Concourse Blvd. Santa Rosa, CA 95403			—			—			—	3.161	%	9,828	9,828
Ned B. Stein	326 Blabcock Rd. Houston, TX 77024			—			—			—	8.826	%	27,444	27,444
John Gladstein, Trustee for the John & Andrea Gladstein	3350 Calistoga Rd. Santa Rosa, CA 95404			—			—			—	6.175	%	19,202	19,202
Francis Connelly, Trustee for The Francis J & Shannon A	P.O. Box 972 St. Helena, CA 94574			—			—			—	2.646	%	8,227	8,227
Al Coppin, Trustee for the Al Coppin Trust	1355 N. Dutton Ave. Santa Rosa, CA 95401			—			—			—	1.767	%	5,495	5,495
Stephen B. McCullagh, Trustee for the Stephen B. &	3564 Foxwood Pl. Santa Rosa, CA 95405			—			—			—	1.767	%	5,495	5,495
Larry L. Wasem - SEP IRA	414 Aviation Blvd. Santa Rosa, CA 95403	0.632	%	1,004	0.632	%	887	0.632	%	1,824			—	3,715
Health Care Property Investors, Inc	3760 Kilroy Airport Way, Suite 300, Long Beach CA 90806	17.364	%	27,577	17.343	%	24,314	17.343	%	50,027	31.21	%	97,038	198,956
Total per Contributor and Cumulative Totals		100	%	158,821 units	100	%	140,197 units	100	%	288,458 units	100	%	310,934 units	898,410 units

1

HCP Managing Member Units

		Aegis of Pleasant Hill	Aegis of Dana Point	Aegis of Granada Hills	Aegis of Concord (Fee)	Aegis of Concord (Leasehold)	Total
Name	Address	# of Units	# of Units	# of Units	# of Units	# of Units	# of Units
Health Care Property Investors, Inc	3760 Kilroy Airport Way, Suite 300, Long Beach CA 90806	346,985	551,338	502,132	166,622	278,362	1,845,439

2

EXHIBIT B
NOTICE OF REDEMPTION

To:	HCP DR California, LLC
	c/o Health Care Property Investors, Inc.
	3760 Kilroy Airport Way, Suite 300
	Long Beach, California 90806

The undersigned Member or Assignee hereby irrevocably tenders for Redemption                    LLC Units in HCP DR California, LLC in accordance with the terms of the Amended and Restated Limited Liability Company Agreement of HCP DR California, LLC, dated as of July 22, 2005 (the “Agreement”), and the Redemption Rights referred to therein. The undersigned Member or Assignee:

(a)undertakes (i) to surrender such LLC Units and any certificate therefor at the closing of the Redemption and (ii) to furnish to the Managing Member, prior to the Specified Redemption Date, the documentation, instruments and information required under Section 8.6.E of the Agreement;

(b) directs that, at the sole discretion of the Managing Member, either (i) a certified check representing the Cash Amount deliverable upon closing of the Redemption be delivered to the address specified below, after deducting therefrom any costs or expenses to which the undersigned Member or Assignee is responsible pursuant to the Agreement, or (ii) a certificate(s) representing the REIT Shares deliverable upon the closing of such Redemption be delivered to the address specified below;

(c)represents, warrants, certifies and agrees that: (1) the undersigned Member or Assignee has, and at the closing of the Redemption will have, good, marketable and unencumbered title to such LLC Units, free and clear of the rights or interests of any other person or entity, (2) the undersigned Member or Assignee has, and at the closing of the Redemption will have, the full right, power and authority to tender and surrender such LLC Units as provided herein, (3) the undersigned Member or Assignee has obtained the consent or approval of all persons and entities, if any, having the right to consent to or approve such tender and surrender, (4) such Redemption is in compliance with the provisions of Section 8.6 of the Agreement, and (5) except to the extent deducted from the Cash Amount pursuant to clause (b)(i) above, the undersigned Member or Assignee shall, as a condition to receipt of the REIT Shares, reimburse to Managing Member all costs and expenses for which such undersigned Member or Assignee is responsible pursuant to the Agreement; and

(d)acknowledges that it will continue to own such LLC Units until and unless such Redemption transaction closes, subject to the provisions of Section 5.7 of the Agreement.

All capitalized terms used herein and not otherwise defined shall have the same meaning ascribed to them respectively in the Agreement.

Dated:	Name of Member or Assignee:
	(Signature of Member or Assignee)
	(Street Address)
	(City)   (State)   (Zip)
	Signature Guaranteed by:
	Issue REIT Shares in the name of:
	Please insert social security or identifying number:

B-1

EXHIBIT C
FORM OF JOINDER AGREEMENT

JOINDER TO OPERATING AGREEMENT

THIS JOINDER TO OPERATING AGREEMENT (the “Joinder”) effecting a joinder to the Amended and Restated Limited Liability Company Operating Agreement of HCP DR California, LLC dated as of July 22, 2005 (the “Operating Agreement”) is entered into as of                           , 2005, by and between HCP DR California, LLC, a Delaware limited liability company (the “Company”), and                             , a                             (the “New Member”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Operating Agreement.

1.New Member agrees to be bound by, the terms and conditions of the Operating Agreement, a copy of which is attached hereto as Exhibit A.

2.New Member represents to the Company and the Managing Member that the representations and warranties set forth in Section 3.4 of the Operating Agreement are true and correct as of the date hereof.

3.The Company agrees to admit New Member as a Non-Managing Member of the Company and, in connection therewith, to update and amend Exhibit A to the Operating Agreement to reflect the information set forth on Exhibit B attached hereto.

4.This Joinder may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement.

5.This Joinder shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to principles of conflicts of laws or choice of law of the State of Delaware or any other jurisdiction which would result in the application of the law of any jurisdiction other than the State of Delaware.

6.The descriptive headings of this Joinder are inserted for convenience only and do not constitute a part of this Joinder.

7.If any provision of this Joinder is in conflict with or inconsistent with any provision of the Operating Agreement, the provision of the Operating Agreement shall control.

C-1

IN WITNESS WHEREOF, this Joinder to Operating Agreement has been duly executed and delivered by the parties as of the date first above written.

COMPANY:		NEW MEMBER:
HCP DR California, LLC, a Delaware limited liability company
		By:
By:	Health Care Property Investors, Inc.,	Name:
	a Maryland corporation, its Managing	Title:
	Member
	By:
	Name:
	Title:

C-2

EXHIBIT D

EXAMPLE OF CERTAIN CALCULATIONS PURSUANT TO SECTION 5.6.C

Assumptions for example –

(1)  LLC unit ownership:

	Units	Effective Price		Value of Interest	Percentage Interest
Managing Member Units (MMUs)	2,400,000	$	25.	60,000,000	75	%
Non-Managing Member Units (NMMUs)	800,000	$	25.	20,000,000	25	%
Total	3,200,000			80,000,000

(2)  Sale of property to which distribution pursuant to Sec. 5.6.A(2) relates:

Disposition Proceeds = $30MM

Initial value = $25MM

Property Appreciation = $5MM

Portion of Disposition Proceeds to be distributed = $10MM

(3)  Other assumptions:

Value of REIT stock on Reduction Date = $30

There is no Preferred Return Shortfall or Managing Member Shortfall

Unit Portion (Net Cash Flow of property sold/Net Cash Flow of all contributed properties) = .20

There have been no previous distributions of Disposition Proceeds or Refinancing Debt Proceeds

Adjustment Factor = 1.0

Calculation of Reduction:

Sec. 5.6.C(1) – NMMU Reduction = 82,733 Units ($2,482,000 ÷ 30), computed as

(i) excess of

(a) $2.5MM ($10MM distribution * 25% NMM LLC units), over

(b) NMM Sharing Amount of $18,000

(U) (.20 Unit Portion * 3.2MM LLC Units Outstanding) = 640,000 = Unit Amount

(V) 640,000 * ($30 Value - $25 Effective Price) = $3.2MM Unit Appreciation

(W) $5MM Property Appreciation - $3.2MM Unit Appreciation = $1.8MM = Aggregate Sharing Amount

(X) $1.8MM Aggregate Sharing Amount - $0 Prior Sharing Amounts = $1.8MM Sharing Amount

(Y) $1.8MM * 1% NMM Sharing Percentage = $18,000 NMM Sharing Amount

(Z) $2.5MM – $18,000 = $2,482,000

Divided by

D-1

(ii) $30 Value on Reduction Date

Sec. 5.6.C(2) – MMU Reduction = 248,199 Units, computed as

(i) 82,733 Reduction Units for NMMs divided by 25% Aggregate Percentage Interests of NMMs before Reduction, times

(ii) 75% Percentage Interest of MM before Reduction

Calculation of Profit Participation Amount for NMMs:

$431,667, computed as the sum of

(a) $18,000 (Cumulative distributions pursuant to Sec. 5.6.A(2) that did not result in a Reduction), and

(b) $413,667 ($2,482,000 [$2.5MM cumulative distributions pursuant to sec. 5.6.A(2) – $18,000]

* (($30 weighted average Value on each Reduction Date - $25 Effective Price)/$30 weighted average Value on each Reduction Date)

D-2

EXHIBIT E

FORM OF BOTTOM DOLLAR GUARANTEE

[See Attached]

E-1

GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT (“Guarantee”), dated as of     , 20  , is made by                  (“Guarantor”), in favor of                            (“Guaranteed Party”).

WHEREAS,                                   (“Borrower”), is indebted to the Guaranteed Party pursuant to that certain                          (the “Credit Document”) by and between Borrower and Guaranteed Party which is secured by a                                  (the “Mortgage”) on certain property of the Borrower described on Schedule 1 hereto (the “Property”).

WHEREAS, the Guarantor desires to guarantee collection of a portion of the  amount owing under the Credit Document (the “Obligations”) not in excess of $                     (the “Guaranteed Amount”).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, Guarantor agrees as follows:

1.Guarantee

A.The Guarantor hereby irrevocably and unconditionally guarantees the collection by the Guaranteed Party of, and hereby agree to pay to the Guaranteed Party upon demand (following (1) foreclosure of the Mortgage, exercise of the powers of sale thereunder and/or acceptance by the Guaranteed Party of a deed to a Property in lieu of foreclosures, and (2) the exhaustion of the exercise of any and all remedies available to the Guaranteed Party against Borrower, including, without limitation and to the extent applicable, realizing upon the assets of Borrower other than the Property), an amount equal to the excess, if any, of the Guaranteed Amount over the Borrower Proceeds (as hereinafter defined). The Guarantor’s obligations as set forth in this Paragraph 1.A. are hereinafter referred to as the “Guaranteed Obligations.”

B.For the purposes of this Guarantee, the term “Borrower Proceeds” shall mean the aggregate of the Foreclosure Proceeds (as hereinafter defined) plus all amounts collected from the Borrower or realized from the sale of assets of the Borrower other than the Property.

C.For the purposes of this Guarantee, the term “Foreclosure Proceeds” shall have the applicable meaning set forth below with respect to a Property:

1.If at least one bona fide third party unrelated to the Guaranteed Party (and including, without limitation, the Guarantor) bids for such Property at a sale thereof, conducted upon foreclosure of the related Mortgage or exercise of the power of sale thereunder, Foreclosure

E-2

Proceeds shall mean the highest amount bid for such Property by the party that acquires title thereto (directly or through a nominee) at or pursuant to such sale. For the purposes of determining such highest bid, amounts bid for the Property by the Guaranteed Party shall be taken into account notwithstanding the fact that such bids may constitute credit bids which offset against the amount due to the Guaranteed Party under the Credit Document.

2.If there is no such unrelated third-party at such sale of the Property so that only bidder at such sale is the Guaranteed Party or its designee, the Foreclosure Proceeds shall be deemed to be fair market value (the “Fair Market Value”) of the Property as of the date of the foreclosure sale, as such Fair Market Value shall be mutually agreed upon by the Guaranteed Party and the Guarantor or determined pursuant to subparagraph 1.D.

3.If the Guaranteed Party receives and accepts a deed to the Property in lieu of foreclosure in partial satisfaction of Borrower’s obligations under the Credit Document, the Foreclosure Proceeds shall be deemed to be the Fair Market Value of such Property as of the date of delivery of the deed-in-lieu of foreclosure, as such Fair Market Value shall be mutually agreed upon by the Guaranteed Party and the Guarantor or determined pursuant to subparagraph 1.D.

D.Fair Market Value of a Property shall be the price at which a willing seller not compelled to sell would sell such Property, and a willing buyer not compelled to buy would purchase the Property, free and clear of all mortgages but subject to all leases and reciprocal easement and operating agreements. If the Guaranteed Party and Guarantor are unable to agree upon the Fair Market Value of a Property in accordance with subparagraphs 1.C.2. or 3. above, as applicable, within twenty (20) days after the date of the foreclosure sale or the delivery of the deed-in-lieu of foreclosure, as applicable, relating to a Property, either party may have the Fair Market Value of a Property determined by appraisal by appointing an appraiser having the qualifications set forth below to determine the same and by notifying the other party of such appointment within twenty (20 days after the expiration of such twenty (20) day period. If the other party shall fail to notify the first party, within twenty (20) days after its receipt of notice of the appointment by the first party, of the appointment by the other party of an appraiser having the qualifications set forth below, the appraiser appointed by the first party shall alone make the determination of such Fair Market Value. Appraisers appointed by the parties shall be members of the Appraisal Institute (MAI) and shall have at least ten years’ experience in the valuation of properties similar to the Property being valued in the greater metropolitan area in which such Property is located. If each party shall appoint an appraiser having the aforesaid qualifications and if such two appraisers cannot, within thirty (30) days after the appointment of the second appraiser, agree upon the determination hereinabove required, then they shall select a third

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appraiser which third appraiser shall have the aforesaid qualifications, and if they fail so to do within forty (40) days after the appointment of the second appraiser they shall notify the parties hereto, and either party shall thereafter have the right, on notice to the other, to apply, for the appointment of a third appraiser to the chapter of the American Arbitration Association or its successor organization located in the metropolitan area in which the Property is located or to which the Property is proximate or if no such chapter is located in such metropolitan area, in the metropolitan area closest to the Property in which such a chapter is located. Each appraiser shall render its decision as to the Fair Market Value of the Property in question within thirty (30) days after the appointment of the third appraiser and shall furnish a copy thereof to the Guaranteed Party and Guarantor. The Fair Market Value of the Property shall then be calculated as the average of (i) the Fair Market Value determined by the third appraiser and (ii) whichever of the Fair Market Values determined by the first two appraisers is closer to the Fair Market Value determined by the third appraiser; provided, however, that if the Fair Market Value determined by the third appraiser is higher or lower than both Fair Market Values determined by the first two appraiser, such Fair Market Value determined by the third appraiser shall be disregarded and the Fair Market Value of the Property shall then be calculated as the average of the Fair Market Value determined by the first two appraisers. The Fair Market Value of a Property as so determined shall be binding and conclusive upon the Guaranteed Party and Guarantor. Each party shall bear the cost of its own appraiser and the cost of appointing, and the expenses of, the third appraiser shall be shared equally by the Guaranteed Party and Guarantor.

2.Waivers: Other Agreements.

The Guaranteed Party is hereby authorized, without notice to demand upon Guarantor, which notice or demand is expressly waived hereby, and without discharging or otherwise affecting the enforceability of the obligations of the Guarantor hereunder (which shall remain absolute and unconditional notwithstanding any such action or omission to act), from time to time to:

(i)waive or otherwise consent to noncompliance with any provision of the Credit Document or Mortgage, or any part thereof, or any other instrument or agreement in respect of the Guaranteed Obligations now or hereafter executed by Borrower or any other person and delivered to the Guaranteed Party, except that Borrower shall not extend the time for payment of the Guaranteed Obligations by Borrower;

(ii)accept partial payments on the Guaranteed Obligations by Borrower;

(iii)receive, take and hold additional security or collateral for the payment of the Guaranteed Obligations or for the payment of this Guarantee, or for the payment of any other guarantees of the Guaranteed

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Obligations, and exchange, enforce, waive, substitute, liquidate, terminate, abandon, fail to perfect, subordinate, transfer, or otherwise alter or release any such additional security or collateral;

(iv)apply any and all such security or collateral and direct the order or manner of sale thereof as the Guaranteed Party may determine in its sole discretion;

(v)settle, release, compromise, collect or otherwise liquidate the Guaranteed Obligations or accept, substitute, release, exchange or otherwise alter, affect or impair any Mortgage or any other security or collateral for the Guaranteed Obligations or any other guarantee therefore, in any manner;

(vi)add, release or substitute any one or more other guarantor, Borrowers or endorsers of the Guaranteed Obligations and otherwise deal with Borrower or any other guarantor as the Guaranteed Party may elect in its sole discretion; and

(vii)apply any and all payments or recoveries from Borrower, Guarantor or from any other guarantor of the Guaranteed Obligations, to such of the Guaranteed Obligations as the Guaranteed Party in its sole discretion may determine, whether such Guaranteed Obligations are secured or unsecured or guaranteed or not guaranteed by others.

3.             Independent Obligations. Except as expressly set forth in Paragraph 1, the obligations of the Guarantor hereunder are independent of the obligations of the Borrower, and a separate action or actions may be brought by the Guaranteed Party against the Guarantor, whether or not actions are brought against the Borrower. The Guarantor expressly waives any and all rights of subrogation, reimbursement, indemnity, exoneration, contribution or any other claim which Guarantor may now or hereafter have against the Borrower, or any other person directly or contingently liable for the payment or performance of the obligations under the Credit Document and the Mortgage arising from the existence or performance of this Guarantee (including, but not limited to, HCP DR California, LLC, Health Care Property Investors, Inc., or any other member of HCP DR California, LLC) (except and only to the extent that Guarantor makes a payment to the Guaranteed Party in excess of the amount required to be paid under Paragraph 1 and the limitations set forth therein); provided, however, that nothing herein shall be construed as a waiver by Guarantor of any right it has now or in the future to obtain reimbursement from Guarantor’s members (as distributees from Guarantor of equity interests in HCP DR California, LLC, the owner of the Borrower) for amounts paid by Guarantor pursuant to this Guaranty Agreement.

4.Miscellaneous.

A.1. Subject to the provisions of Section 4.A.2., this Guarantee is irrevocable as to any and all of the Guaranteed Obligations until the earliest of (i)                                     , (ii) the earliest date that, as a result of a repayment, compromise or adjustment of a principal amount of the Obligations, the total

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principal amount outstanding under the Credit Document is reduced by an amount equal to or greater than $                                , (iii) the date upon which the Borrower incurs indebtedness senior to, or pari passu with the Obligations, and (iv) the earliest date upon which all of the following have occurred: (A) Guarantor has disposed of all of its equity interests in the Borrower, excluding, however, any distribution of equity interests in the Borrower to members of the Guarantor, which members agree to assume a portion of Guarantor’s obligations hereunder, (B) the fair market value of the Property exceeds the outstanding balance of the Obligations (including accrued but unpaid interest) and (C) the Guarantor notifies the Guaranteed Party that it is terminating its obligations under this Guaranty Agreement (the “Termination Date”), provided that the obligations of the Guarantor hereunder shall continue after the Termination Date to the extent of any claims that are attributable fully and solely to an event or action that occurred on or before the Termination Date.

  2.  The Guaranteed Party recognizes that Guarantor intends to distribute equity interests in HCP DR California, LLC, the owner of the Borrower, to its members. In the event that a member (or a distributee of a member in the case of a member that is itself a limited liability company, partnership or trust) disposes of all or any portion of such member’s (or distributee’s) equity interest in HCP DR California, LLC, the Guaranteed Amount shall be decreased by an amount equal to the portion of the Guaranteed Amount allocable to the disposed of equity interest, provided that the condition set forth in clause (iv)(B) of Section 4.A.1. is satisfied and provided further that the Guarantor notifies the Guaranteed Party that it is reducing its obligations under this Guaranty Agreement (a “Reduction Date”), provided that the obligations of the Guarantor hereunder shall continue after the Reduction Date with respect to the Guaranteed Amount undiminished by such reduction to the extent of any claims that are attributable fully and solely to an event or action that occurred on or before said Reduction Date.

B.This Guarantee is binding on the Guarantor and its successors and assigns, and inures to the benefit of the Guaranteed Party.

C.No delay on the part of the Guaranteed Party in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise or waiver by the Guaranteed Party of any right or remedy shall preclude any further exercise thereof, nor shall any modification or waiver of any of the provisions of this Guarantee be binding upon the Guaranteed Party, except as expressly set forth in a writing duly signed or delivered by the Guaranteed Party or on the Guaranteed Party’s behalf by an authorized officer or agent of the Guaranteed Party. The Guaranteed Party’s failure at any time or times hereafter to require strict performance by Borrower, Guarantor or any other person of any of the provisions, warranties, terms and conditions contained in any security agreement, agreements, guarantee, instrument or document now or at any time or times hereafter executed by Borrower or Guarantor or delivered to the Guaranteed Party shall not waive, affect or diminish any

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 right of the Guaranteed Party at any time or times hereafter to demand strict performance thereof and such right shall not be deemed to have been waived by any act or knowledge of the Guaranteed Party, its agents, officers, or employees, unless such waiver is contained in an instrument in writing signed by an officer or agent of the Guaranteed Party and directed to Borrower or Guarantor, or either of them (as the case may be) specifying such waiver. No waiver by the Guaranteed Party of any default shall operate as a waiver of any other default or the same default on a future occasion, and no action by the Guaranteed Party permitted hereunder shall in any way affect or impair the Guaranteed Party’s rights or the obligations of Guarantor under this Guarantee.

D.This Guarantee shall be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws (other than the conflicts of law provisions) of the State of New York.

E.This Guarantee contains all the terms and conditions of the agreement between the Guaranteed Party and Guarantor. The terms and provisions of this Guarantee may not be waived, altered, modified or amended except in writing duly executed by the party to be charged thereby.

F.Any notice shall be directed to the parties at the following addresses:

If to Guarantor:

With a copy to:

If to the Guaranteed Party:

With a copy to:

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COUNTERPART GUARANTOR SIGNATURE PAGE

ATTACHED TO AND MADE A PART OF

THAT CERTAIN GUARANTY AGREEMENT

DATED AS OF              

IN WITNESS WHEREOF, the undersigned has duly executed this Guarantee as of the date first above written.

By:
	Name:
	Title:  Managing Member

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Schedule I to Guaranty Agreement

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EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” in the Registration Statement (Form S-3) and related Prospectus of Health Care Property Investors, Inc. for the registration of 699,454 shares of its common stock and to the incorporation by reference therein of our report dated February 10, 2006 (except for Note 2 under “Discontinued Operations”, Note 18 Segment Disclosures, and Schedule III: Real Estate and Accumulated Depreciation, as to which the date is June 28, 2006), included in the Health Care Property Investors, Inc.’s Current Report (Form 8-K) dated June 30, 2006, with respect to the consolidated financial statements and schedule of Health Care Property Investors, Inc., and of our report dated February 10, 2006 with respect to Health Care Property Investors, Inc. management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Health Care Property Investors, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 2005 filed with the Securities and Exchange Commission.

	/s/ Ernst & Young LLP
Irvine, California
August 4, 2006

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated March 24, 2006 relating to the financial statements, financial statement schedules, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting of CNL Retirement Properties, Inc. which appears in Health Care Property Investors, Inc's Current Report on Form 8-K dated August 4, 2006. We also consent to the reference to us under the heading “Experts.”

/s/ PricewaterhouseCoopers LLP

Orlando, Florida

August 4, 2006

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated August 4, 2006 relating to the financial statements of CNL Retirement Corp. which appears in the Health Care Property Investors, Inc's Current Report on Form 8-K dated August 4, 2006. We also consent to the reference to us under the heading “Experts.”

/s/ PricewaterhouseCoopers LLP

Orlando, Florida

August 4, 2006